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CHAPTER

1

INCOME TAX APPELLATE TRIBUNAL – AN OVERVIEW

Q.1 What is the objective of constituting the Income Tax Appellate Tribunal?

Ans. The Frank’s Committee on Administrative Tribunals and Enquiries has stated that the advantages which Tribunals have over Courts lay in cheapness, accessibility,

freedom from technicality, expedition and expert knowledge of the Members over the particular subjects. To achieve the said objective, the Income Tax Appellate Tribunal was set up on 25th January, 1941, as an independent quasi-judicial body to hear second appeals from the decisions of the Appellate Assistant Commissioner (now Commissioner of Income Tax (Appeals). The motto of the Income Tax Appellate Tribunal is “Sulabh Nyay Satvar Nyay”. Criteria for its working is “(i) Cheapness; (ii) Accessibility; (iii) Freedom from technicalities; (iv) Expedition; and (v) an expert knowledge of the subject”. Sections 252 to 255 of the Income-tax Act, 1961, sections

24 and 26 of Wealth Tax Act deal with provisions relating to appeals to the Appellate

Tribunal. The Income Tax Appellate Tribunal (“The Tribunal”) has formulated its own Rules and procedure – The Income Tax (Appellate Tribunal) Rules, 1963 (“the rules”) in exercise of the powers conferred under section 255(5) of the Income-tax Act. It is functioning under the Union Ministry of Law and Justice and not under the Union Ministry of Finance.

Q.2 When was the Tribunal founded?

Ans. The Tribunal was founded on 25th January, 1941.The Tribunal was constituted on the recommendations of the Enquiry Committee Report, 1936. A Bill to amend the Income-tax Act, 1922 was introduced in the Central Legislative Assembly to set up the Income Tax Appellate Tribunal. This was referred to the Select Committee. In pursuance of the recommendations of the said Committee section 5A was introduced in the Income-tax Act, 1922.

Q.3

What is the total number of Benches of the Tribunal and the places at which they are located?

Ans. In pursuance of sub-rule (1) of Rule 4 of the Rules, the present sanctioned strength is

53 benches at 25 places vide Order F. No. 63-Ad(AT)/97. The said order contains

names of the place and number of Bench(es) along with Districts/States/Union Territories wherefrom appeals and applications shall be heard and determined by such Bench(es). 10 new Benches are likely to be added to the present strength. The headquarters of the Tribunal and its President is located at Mumbai. The President of the Tribunal is the head of the institution. He exercises administrative controls over all Benches of the Tribunal. The headquarters of the Sr. Vice President is at Delhi. There are seven zones, each zone has one Vice President, However, Mumbai has two Vice Presidents. Zones with Benches are: Mumbai Zone (13); Delhi Zone (11); Calcutta Zone (8); Chennai Zone (5); Ahmedabad Zone (5); Hyderabad Zone (6) and

1

Chandigarh

Zone

(5).

Tribunal

Benches

all

over

India

are

considered

as

one

Institution.

Q.4

Ans. The language used in the Tribunal is English. However, parties may file documents in Hindi if they so desire, and the Bench may permit the use of Hindi in its proceedings or may pass orders in Hindi in the Benches located in the States notified in Notification No. F.71.Ad(AT)74 dated 5-5-1975.

Q.5 What are the Court hours of the Tribunal?

Ans. The Court timing is from 10.30 a.m. to 1.30 p.m. and 2.30 p.m. to 4.30 p.m., with certain exception in the North Eastern States. However, a large number of the Benches function only uptil 1.30 p.m. It is desirable that the bench exhausts the cause list for the day and if necessary re-assemble after the lunch break. Part heard matters are usually posted for hearing at 2.30 p.m. or next day. The cause-list is prepared in advance and is displayed at a conspicuous place outside the Court room.

Q.6 Whether proceedings before the Tribunal are open to the public?

Ans. Except cases in respect of which the Central Government has issued notification under sub-section (2) of section 138 of the Income-tax Act 1961, the proceedings before the Tribunal are open to the public. However the Tribunal may in its discretion restrict proceedings before it in a particular concerned case to the assessee and its representatives.

What is the language used in the Tribunal?

Q.7

What are the qualifications required for appointment as Member of the Income Tax Appellate Tribunal

Ans.

The Tribunal has two types of Members – Judicial and Accountant

A

Judicial Member shall be a person who has for at least ten years held a Judicial

office in the territory of India or who has been a member of the Indian Legal Service and has held a post in Grade II of that Service or any equivalent or higher post for at

least three years or an advocate in practice for at least ten years.

An Accountant Member shall be a person who has for at least ten years been in the practice of accountancy as a Chartered Accountant under the Chartered Accountants Act, 1949 (38 of 1949), or as a registered accountant under any law formerly in force

or

partly as a registered accountant and partly as a Chartered Accountant, or who has

been a member of the Indian Income-tax Service, Group A, and has held the post of Additional Commissioner of Income-tax or any equivalent or higher post for at least three years.

In our opinion, individuals holding the rank of Commissioner and above, alone should qualify considering the sanctity and status of the prestigious institution. The amendment operative from 1-8-1998 needs re-consideration.

Q.8

How is a Member of the Tribunal selected?

Ans. As and when a vacancy arises the Ministry of Law and Justice makes an announcement in the leading newspapers and invites applications from eligible candidates. The Federation always publishes the details of vacancies for the post of the Members of the ITAT in its journal. The applications are scrutinized and thereafter, interviews are held at different places. The Selection Committee comprises of a Sr. Judge of the Supreme Court as Chairman, Union Law Secretary, President of ITAT and Member, Law Commission. There is complete transparency in the process of interview and has proved to be a satisfactory method for selection of Members.

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Q.9

What is the pay scale and facilities provided to a Member?

Ans.

The pay of the President / Senior Vice President is fixed at Rs. 26,000/-. The pay scale of Vice President is 24,050/- – 26,000/-; Member Rs. 22,400/- – Rs. 26,000/-. Residential accommodation, car, telephone and other facilities and perquisites are also provided. The pay is very much similar to a Judge of the High Court. With the efforts of the Federation and its member Associations further facilities have been provided to Members of the Tribunal [All India Federation of Tax Practitioners jointly with Rajasthan Tax Consultants vs. Union of India (1998) 97 Taxmann 48 (Raj.); All India Federation of Tax Practitioners vs. Union of India [Income Tax Review Page 4, Vol. XXIII April, 1997] Union of India vs. All Gujarat Federation of Tax Practitioners & Others and Rajasthan Tax Consultants & Ors. SLP (Civil) Nos. 6904-05 1998 of (2004) 6 AIFTP Journal (April) 34. Compliance report was called and submitted in April, 2004.

Q.10

Who has the power to transfer Members from one place to another?

Ans.

Ever since the establishment of ITAT, the President of the ITAT has the power to transfer a Member from one place to another. In the year 1996, then Law Secretary issued a notification stating that, the Ministry of Law has the power to transfer Members. The said notification was challenged by the ITAT Bar Association, Mumbai and other associations. The Hon’ble Bombay High Court, stayed the operation of notification (Income Tax Appellate Tribunal Bar Association vs. Union of India, 2350 of 1996, Income Tax Review April 1997 page 1 to 3 Vol. XXIII No. 1). The matter was transferred to Hon’ble Supreme Court. The Hon’ble Supreme Court vide their order dated 5th January, 2004, upheld the order of Bombay High Court and prescribed certain guidelines (AIFTP Journal Vol. 6 No. 1 January, 2004 issue. As per guidelines, the President in consultation with Sr. Vice President and Vice Presidents, has the exclusive authority to transfer the Members from one place to another. [Ajay Gandhi vs. B. Singh (2004) 265 ITR 451 (SC)].

Q.11

What

type

of

residential

accommodation the Members of ITAT are

Ans.

entitled to? The Members of ITAT are entitled to type VII accommodation. However, in city like Mumbai, there is great difficulty in getting the accommodation. When the Members were not getting the residential accommodation, the Federation filed a PIL before the Bombay High Court. After the said order of High Court the Members are being allowed accommodation quite expeditiously. (All India Federation of Tax Practitioners vs. Union of India, 2464 of 1996, Income Tax Review Page 4 Vol. XXIII April 1997). However, even now, Members who have been appointed from the profession are not getting accommodation immediately as they do not have previous Government service experience. There is discrimination in allotting the residential accommodation to Members of ITAT. The matter was taken to the Bombay High Court and the Court directed to make representation to Government. The representation is pending before the Government for its consideration. In Rajasthan Tax Consultants vs. Union of India (1998) 97 Taxmann 48 (Raj.), the Court held that, Members of Tribunal are Judicial officers for all purposes as they discharge Judicial functions and their independence should be maintained by providing suitable official residential accommodation. The Hon’ble Supreme Court has laid down detailed guidelines for providing residential accommodation and other facilities to the Members of Income Tax Appellate Tribunal (UOI vs. All Gujarat Federation & Others (supra).

Q.12

Who can represent before the Tribunal and by what process?

3

Ans.

Any legal practitioner, Chartered Accountant, tax practitioner or any person related to the assessee or person regularly employed by the assessee can represent on filing of the authority. An advocate should file Vakalatnama affixing Court fee and welfare stamps as per the State Law. In Maharashtra, it is Rs. 10/-, if he is member of Welfare scheme, additional welfare stamp of Rs. 2/-. Other persons have to furnish a Power-of-Attorney on non-judicial stamp of the value specified under the State Stamp Law. In Maharashtra, as per Article 48(a) it is Rs. 100/- for special Power of Attorney and Rs. 500/- in any other case. Court fee and stamp duty is as per State Law, and varies from State to State. In case of deficiency of stamp, the Assistant Registrar should bring it to the notice of the Bench. He himself cannot refuse to accept as stated in the letter of the President D.O. No. P/7/2003 dated 8-12-2003 published in (2003) 185 CTR (N & V) 48.

Stamp duty on documents authorizing appearance on behalf of assessee.

After the issue of Board’s Circular No. 50 (XL-43) D of 1956, dated the 28th December, 1956, the question has been raised whether accountants and income tax

practitioners should file vakalatnamas or powers of attorney and, if the latter, what

the scales

of

court

fees

or

stamp duties leviable

thereon.

The Board have been advised that a document purporting to authorize a person who

is not a pleader or mukhtar duly appointed under section 7 of the Legal Practitioners Act, 1879, is not a vakalatnama or a mukhtarnama and requires to be stamped as a power of attorney under the Stamp Act. Therefore, the power of attorney in favour of

a registered accountant or an income-tax practitioner or any other person who is not

a duly appointed mukhtar under section 7 of the Legal Practitioners Act is a power of

attorney (and not a vakalatnama or mukhtarnama) and requires to be stamped not under the Court Fees Act, but under the provisions of the Stamp Act as in force in the particular area; i.e., subject to the local amendments.

C.B.R. Circular No. 9 (XL-48) of 1958 dated May 13, (1958) 34 ITR 19 St.

Q.13

Can authority be given to a firm to represent its client in a matter before the ITAT?

Ans.

It is possible to give authority in the name of a firm. However, the partner who represents before the ITAT must sign as partner. Necessary information about the constitution of the partnership firm should be filed with the Bar Council/Bench/Institute.

Q.14

Whether a Sr. Advocate needs to file Vakalatnama?

 

Ans.

An Advocate is designated as a Senior Advocate by the Supreme Court or a High Court by virtue of his ability, standing at the Bar or special knowledge or experience in law, deserving of such distinction. The Bar Council of India Rules, 1976, neither permit nor allow a Senior Advocate to file a Vakalatnama, to appear without junior

Advocate

in

any

Court

or

Tribunal. A

senior Advocate should get precedence to address over other Advocates.

In E. S. Reddi vs. The Chief Secretary, Government of A. P. (1987) SC 1550, the Hon’ble Supreme Court discussed in detail the status of Sr. Advocate.

Q.15

Is there any dress regulation prescribed for the Members and for the Authorised Representative?

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Ans.

15.1

Summer dress for the Members of the Tribunal shall be white shirt, white pant with black coat, a black tie or a buttoned-up black coat. In winter, stripped or black trousers may be worn in place of white trousers.

15.2 Rule 17A of the Rules prescribes the dress for the authorised representative of the parties (other than a relative or regular employee of the assessee). In the case of a male, a suit with a tie or buttoned up coat over a pant or national dress; i.e., a long buttoned up coat or dhoti or churidar pyjama is prescribed. The colour of the coat shall preferably be black. In the case of female representatives black coat over white or any other sober coloured saree. However, if the authorised representatives belongs to a profession such as law or Chartered Accountancy and they have been prescribed a dress for appearing in the professional capacity before any Court, Tribunal or other such authority, they may at their option appear in that dress in lieu of the dress mentioned above.

Sometimes, we observe that Advocates/Chartered Accountants appear before the Tribunal without wearing the prescribed dress and the Members adjourn the matters till the authorised representative appears in the prescribed dress. We suggest that any representative who appears before the Tribunal, should wear the proper dress to avoid unnecessary adjournment. Other persons appearing before the Tribunal shall also be properly dressed.

Q.16

Ans. As per tradition, the Members are addressed as “Your Honour”. Some representatives address Members as “Your Lordships” which is improper and need to be avoided.

If the counsel has two cases on the same date in different Bench, which Bench has to be give preference?

Ans. According to established practice, the higher Court has to be given the first preference. e.g., if matters are before the Bench of President and also before other Bench, the Counsel has to give preference to Bench of President.

Q.17

How should Members of the Tribunal be addressed?

Q.18

How should communication be addressed to the Registrar of the Income Tax Appellate Tribunal?

Ans.

All communications addressed to the Tribunal by the parties with regard to appeals or applications or cross objections, should bear the number and the Bench thereof, or if the number is not known, the date of filing thereof, should invariably be given. The Registrar vide letter dated 13-4-2000 has issued a Circular stating that the office of the ITAT should accept all the letters/correspondences addressed to the ITAT. It is learnt that some authorities are not honouring this instruction. The text of the Circular is reproduced hereunder:

Date : 13-4-2000

“Notice for General Public

Some complaints have been received by the undersigned from counsels for the assessees that some of the Officers of the Income-tax Appellate Tribunal are refusing to accept any appeals, applications etc. on flimsy grounds.

This is for the general information that no appeal and application can be refused by any of the Government servants, when submitted by the assessee. Defects, if any, are only to be pointed out in writing and placed before the concerned Bench for their orders.

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If any members of the public face any such difficulty whereby any of the Officers have refused to accept appeals, applications etc. on flimsy grounds, immediate attention may kindly be drawn to Registrar in writing for further action at this end.

N. N. Nayak

Registrar

Income Tax Appellate Tribunal”

Q.19

Can the Registrar refuse to accept adjournment petition filed well before proposed date of hearing?

Ans.

No. In Shamalsha Girdhari vs. Asstt. Commissioner (2000) 72 ITD 469 (Bom.), the Tribunal held that, the Registrar cannot refuse to accept adjournment petition filed well before the proposed date of hearing.

Q.20

What is the meaning of Constitution of a Bench, SMC, Division Bench, Third Member and Special Bench?

Ans.

20.1

Constitution of a Bench:

 

Section 252 provides for the constitution of Income Tax Appellate Tribunal consisting of Judicial Members and Accountant Members to discharge the function conferred on the Appellate Tribunal. It also provides for appointment by the Central Government of one or more Members of the Tribunal to be Vice President(s) and of one of the Vice President(s) to be the Senior Vice President. It also provides that the Central Government may appoint Sr. Vice President or one of the Vice Presidents of the Appellate Tribunal to be the President. As per, section 255(1) the powers and functions of the Appellate Tribunal shall be exercised and discharged by Benches of the Tribunal, which shall be constituted by the President from amongst the Members of the Tribunal.

 

20.2

Single Member Bench (SMC):

 

The President or any other authorized Member may, sitting singly, dispose of any case which has been allotted to such Bench, but the jurisdiction of Single Member Bench is limited to cases where the total income of the assessee, as computed by the Assessing Officer does not exceed Rs. 5 Lakhs. Any appeal under the Wealth Tax Act cannot be heard by a Single Member Bench, as held in CWT vs. S. Baliah (1978) 114 ITR 858 (AP), because there is no corresponding section in that Act. A Single Member Bench should follow the view of a Division Bench.

 

20.3

Division Bench:

 

Section 255(2) provides that ordinarily a Bench shall consist of two Members, one Judicial and the other Accountant Member. A Division Bench should follow the view of the Special Bench and a Co-ordinate Bench. In case of disagreement with the view of a Division Bench, it should request the President for constitution of the Special Bench. In case of wealth tax appeal a Division Bench can be constituted by two Judicial Members or two Accountant Members also.

 

20.4

Third Member Bench:

Section 255(4) provides that if the Members of the Bench have a difference of opinion, the case is to be referred by the President of the Tribunal for hearing such points by one or more Members of the Tribunal and such point thereupon is to be decided in accordance with the majority view from amongst the Third Member and the Members who originally heard the case.

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The scope of an order under s.255(4) is very limited. The Third Member has only to agree with the Judicial Member or with the Accountant Member. The Third Member cannot give a different opinion, which would result in three opinions as against two opinions. (ITO vs. Gurubachhan Singh J. Juneja (1995) 55 ITD 75 (95) (Ahd) (TM).

The Third Member cannot himself formulate a new point on which he could rest his decision. He is competent only to decide the points referred to him by the differing members – Jan Mohammed vs. CIT (1953) 23 ITR 15 (All). The Third Member cannot act as if he was an Appellate Authority over the two Members of the Tribunal and direct them to rehear and dispose of the matter afresh – ITO vs. Vice President, ITAT, Madras (1985) 155 ITR 310 (Mad). The jurisdiction of Third Member is not confined to the language of question(s) framed in reference but it extends to the entire sum and substance of opinion on specified point(s). The Third Member has power to consider the entire material, reasoning and conclusions recorded by the Members as well as contentions advanced on behalf of the parties and record his findings in such a manner that difference of opinion amongst members can be decided by a majority view – Khopade Kisanrao Manikrao vs. ACIT (2000) 74 ITD 25 (Pune) (TM). Once specific differences between the Members are referred to Third Member and referral order does not express any difference at all, in identifying difference between Members, Third Member can neither alter questions referred to him nor can modify question and/or reframe questions and then decide reframed question instead of original questions — Niraj Petrochemicals Ltd. vs. ITO (2000) 73 ITD 1 (Hyd.) (TM). Also refer to the speech of Shri M. A. Bakshi, Vice President at Members Conference (2003) 87 ITD Special Issue

 

(35-39).

20.5

Special Bench:

Section 255(3) provides for Constitution of a Special Bench consisting of three or more Members. The President, for disposal of a particular case or cases, may constitute such Special Bench. At least one of the Members of such Special Bench must necessarily be a Judicial member and one an Accountant Member. Such Bench may dispose of cases allotted by the President to it for disposal. The Supreme Court in ITAT vs. DCIT (Assts) (1996) 218 ITR 275 has held that ‘The High Court in the exercise of its powers under Article 226 of the Constitution cannot sit in appeal or judgement against the administrative decision of the President of the Appellate Tribunal who might have felt that the case was of all-India importance and was required to be decided by a larger Bench of the Tribunal of three Members. Such an administrative order is not open to scrutiny under Article 226 of the Constitution of India except in extraordinary cases wherein the order is shown to be a mala fide one’. In C. Ramaiah Reddy vs. ACIT (2003) 87 ITD 439 (Bang.) (SB), it has been held that the President has the power to constitute a Special Bench for disposal of an appeal for any year, he can constitute it suo motu.

Q.21

Is the Tribunal a Court?

Ans.

Technically speaking a Tribunal is not a Court. The Tribunal consists of a Judicial Member and an Accountant Member. An Accountant Member need not be well conversant with the technicalities of law, need not be a law graduate or an advocate or a law officer. An Accountant Member may be a tax authority well versed in accounting principles or a Chartered Accountant. The Income Tax Appellate Tribunal

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is not bound by any technical rules of the law of evidence. The National Tax Tribunal

Ordinance, 2003 by article 16(1) has provided: “The National Tax Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided, by the principles of natural justice”. Section 255(5) empowers the Appellate Tribunal to regulate its own procedure, subject to the provisions of the Act. It has formulated its own procedure by the Income Tax

(Appellate Tribunal) Rules, 1963 and is not governed by the Civil Procedure Code. It

is a final fact finding body but subject to the appellate jurisdiction under s. 260A of

the I.T. Act and writ jurisdiction of the Hon’ble High Court. The Supreme Court has not recognized the Income-tax Appellate Tribunal as a “Civil Court” or as a “Court”. The Supreme Court in Ajay Gandhi vs. B. Singh (2004) 265 ITR 451 at 456 observd:

“The Income-tax Appellate Tribunal exercises judicial functions and has the trappings of a Court”.

Section 255(6) invests the Tribunal, for the purpose of discharging its functions, with all the powers which are vested in the income-tax authorities under section 131 regarding discovery, production of evidence, summoning witnesses and enforcing their attendance and compelling production of their books of account or other documents, and issuing commissions, etc. It further provides that the proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 226, and for the purpose of section 196 of the Indian Penal Code and the Tribunal shall be deemed to be a Civil Court for all the purposes

of section 195 and Chapter XXXV of the Criminal Procedure Code. It is deemed as a

Civil Court only for the specific purpose and not for all purposes or under the Civil

Procedure Code. It is well settled that a deeming provision should be construed strictly.

The Rajasthan High Court in Rajasthan Tax Consultants vs. Union of India (1998) 97 Taxman 48 did not consider the Members of the Income-tax Appellate Tribunal as Members of Judicial services i.e., District Judges etc. It observed: “It is true that the matter before the Supreme Court related to the members of judicial services; i.e., District Judges, etc. and technically the members of the Tribunal may not fall in that category but we are of the opinion that there is no reason that the directions given by the Apex Court should not be made applicable to the members of the Tribunals as for the purposes they are judicial officers and discharge judicial functions.” (Page 56). The Hon’ble Court also observed at page 53 that Judicial Member of the Tribunal is equivalent in rank to Additional Secretary to the Government of India.

It is a familiar feature of modern legislation to set up bodies and Tribunals, and

entrust them with work of a judicial, quasi judicial or administrative character, but they are not courts; in the accepted sense of that term, though they may possess, as observed by Lord Sankey L. C. in Sheel Co. of Australia’s case (1931) Act 275, some of the trappings of a Court. Hon’ble Venkatarama Ayyar J., in Virindar Kumar Satyawadi (1955) 2 SCR 1013, has referred to several decisions of the Courts in England and Australia as to what are the essential characteristics of a Court as distinguished from Tribunals exercising quasi-judicial functions. Lord Sankey L. C. enumerate some propositions on this subject: (1) A Tribunal is not necessarily a Court in this strict sense because it gives a final decision. (2) Nor because it hears witnesses on oath. (3) Nor because two or more contending parties appear before it

between whom it has to decide. (4) Nor because it gives decisions which affect the rights of subjects. (5) Nor because there is an appeal to a Court. (6) Nor because it is

a body to which a matter is referred by another body. [See Rex vs. Electricity Commissioners (1924) 1 K. B. 171)”

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Q.22

What

Tribunal?

is

the

pendency

of

appeals

before

the

Income

Tax

Appellate

Ans. As on 31-8-2004 the number of appeals pending before the Tribunal was 1,45,000, out of which 20,000 appeals could be decided by Single Member Bench. The pendency in Mumbai (35,000), Delhi (20,000), Ahmedabad (17,000), Chennai (13,000). President Shri Vimal Gandhi, with the help of Sr. Vice President and Vice Presidents is making sincere efforts to reduce the pendency to less than a lakh. The ITAT Bar Association, Mumbai, has volunteered to help the ITAT to group matters and dispose of covered matters. We are hopeful that, within two years, the pendency will reduce to less than one lakh. It is likely that a single member case may be disposed off in less than one year.

9

CHAPTER

2

APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL

Q.23

Who can file an appeal to the Tribunal?

Ans. Any assessee who is aggrieved by an order passed by Commissioner (Appeals) or an order passed by a Commissioner under section 12AA; or 263; or 271; or 272A; or 154 amending an order passed under s.263; or an order passed by the Chief Commissioner or a Director General or a Director u/s. 272A; may prefer an appeal to the Appellate Tribunal. Similarly, the Commissioner may prefer an appeal to the Appellate Tribunal against the order of Commissioner of Income Tax (Appeals). It has been held by High Courts that even a third party has a right of appeal if, as a result of an order passed in an appeal by the first appellate authority before whom he is not a party, he is saddled with a liability for any tax or other sum. (1957) 32 ITR 762 (Bom) Kikabhai Abdulali vs. ITAT; (1998) 234 ITR 617 (Ker) Benoy Kurian vs. Agrl. ITO; (1983) 144 ITR 557 (Cal) CIT vs. N. Ch. R. Row & Co.

The Board has issued Instruction No. F-279/126/98 – 17 dated 27-3-2000 stating that the Commissioner should not file an appeal to the Tribunal if the tax effect is less than Rs. 1,00,000/-, appeal to High Court if the tax effect is less than Rs. 2,00,000 and appeal to Supreme Court if tax effect is less than Rs. 5,00,000/-. In CIT vs. Camco Colour Co. (2002) 254 ITR 565 (Bom), the Hon’ble Court dismissed the appeal of the Department, only on the ground that tax effect was less than the prescribed limit. There is divergence of opinion in various High Courts. The Board vide Instruction No. 6 of 2003 dated 17-7-2003 (F. No. 279 / Misc. 18/2003) once again clarified that for ascertaining the tax effect, interest and penalty also should be taken into consideration. According to the Board, the tax effect means the revenue effect, which denotes, the amount of tax, interest, penalty, fine or any other sum involved. In some cases the Tribunal has dismissed the appeal of the Department only on the ground that the tax effect is less than the prescribed limit. See ITO vs. Smt. Tara Devipushpal (2003) 127 Taxman 155 (Jabalpur) (Mag.), ITO vs. Roopchand Jain (2003) 79 TTJ 406 (Nag.)

Q.24 What is the time limit for filing an appeal?

Ans. An appeal has to be filed within 60 days of receipt of an order by the assessee. In the case of the Department the appeal can be filed within 60 days of the receipt of the order by the respective Commissioner. The memo of appeal shall be presented by the appellant in person or by agent or sent by registered post as to reach before the due date. The receiving authority has to endorse the date on which it is received and sign.

Q.25

Whether the Tribunal has the power to condone the delay in filing an appeal?

10

Ans. As per section 253 (5), the Appellate Tribunal may admit an appeal filed beyond the period of limitation if it is satisfied that there was sufficient cause for not presenting the appeal within time. It is desirable to file application for condonation, giving in detail reasons for delay supported by acceptable evidence / affidavit; along with the appeal. Negligence, inaction or mala fides would not constitute sufficient cause.

Instances where the delay was caused due to wrong legal advice or because the assessee was critically ill at the relevant time or that he was bona fide pursuing a remedy which did not lie, were held to be sufficient cause for condonation of delay. The Supreme Court in Collector of Land Acquisition vs. MST Katiji & Others (1987)

167 ITR 471, has held that the Court should have a pragmatic and liberal approach.

The Hon’ble Supreme Court in N. Balakrishnan vs. M. Krishnamurthy (1998) 7 SCC

123 condoned delay of 883 days and has observed that condonation of delay is a

matter of discretion of the Court. Section 5 of the Limitation Act does not provide discretion only in the cases of delay within a certain limit. The only criterion is the acceptability of explanation irrespective of the length of delay. The primary function of the court, being the adjudication of the disputes between the parties and to advance substantial justice, it is not enough to turn down the plea of the litigant and to shut the door against him for some lapse on his part which has caused the delay. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy, the Court must show utmost consideration to the suitor. The Supreme Court in Vedabai vs. Shantaram Baburao Patil & Another (2002) 125 S.T.C. 375 observed that the Court has to exercise its discretion, keeping in mind that the principle of advancing justice is of prime importance and the expression “sufficient cause” should receive a liberal construction. The approach of Courts should be pragmatic so as to impart substantial justice.

Mistake of an Advocate or Consultant, whether a reasonable cause for delay in filing of an appeal?

Q.26

Ans. If the mistake of a professional is bonafide, it shall constitute a “reasonable cause”. The Hon’ble Supreme Court in Rafiq C. Munshilal AIR 1981 SC 1400, (1401) observed that “we cannot be a party to an innocent party suffering injustice merely because his chosen advocate defaulted”. Where an applicant engages a counsel, he would be justified in presuming that the counsel would attend to the case. The applicant cannot be made to suffer for the negligence of the counsel. An appeal cannot be dismissed because the counsel failed to appear when the case was posted for hearing. Also see (1988) 172 ITR 331 (MP) Mahavirprasad Jain vs. CIT, (1979)

118 ITR 507 (SC) Concord of India Insurance Co. Ltd. vs. Smt. Nirmala Devi &

Others, (1990) 181 ITR 183 (All) Kripa Shanker vs. CIT. In Municipal Corporation vs. Ramcharan AIR (2003) S.C. 2164, the Court held that failure of the counsel on account of confusion is a sufficient cause.

Q.27

What documents should accompany the appeal memo?

Ans.

Every memo of appeal shall be filed in the prescribed form (Form No. 36) in triplicate along with –

(i)

Two copies of the order against which appeal is preferred (at least one of which shall be a certified copy);

(ii)

Two copies of the order of the Income Tax Officer;

(iii)

Two copies of the grounds of appeal before the first appellate authority;

(iv)

two copies of the statement of facts, if any, filed before the said appellate authority;

(v)

If appeal is against a penalty order (a) two copies of the assessment order;

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(vi)

If the assessment order is under s. 143(3) read with section 144A – two copies of the directions under s. 144A;

(vii)

In case of reassessment under s. 147 – two copies of the original assessment order;

(viii)

Receipted Challan of Tribunal Fee; The Tribunal may accept the memo of appeal without the above but it is not advisable to file the appeal without the abovementioned annexures except when the appeal is getting barred by time. The appellant shall be intimated and requested to remove the defects by the Registry within the specified period. If no defect memo is issued – it shall be deemed to have been condoned as held in ACIT vs. Rayang Timber Products (P) Ltd. (2002) 82 ITD 73 (Gau) (TM);

(ix)

Vakalatnama/Power of Attorney in favour of the Authorised Representative at the option of the assessee;

(x)

In Revenues appeal – a certified copy of the order of the Commissioner

directing the filing of the appeal. The meaning of the “Certified Copy” has been liberalised by the Explanation to Rule 9 of the Rules vide letter No. 5068 AT/46 dated 17-12-1946. Copy of the order appealed against bearing the signature of the issuing or authorized officer and the seal of the office which issued the copy has been equated with the “Certified Copy”. A photo copy of such order duly authenticated by the appellant or his authorized representative as a true copy, will suffice.

Q.28

What are the fees payable for filing an appeal?

Ans.

The Tribunal fee during 1-6-1992 to 30-9-1998 was as under:–

(a)

Where total income assessed by A.O. was one lakh rupees or less – Rs. 250/-; and

(b)

Where total income exceeded rupee one lakh – Rs. 1,500/-.

However, from 1-10-1998 the fee structure has been substantially enhanced and is as

follows:-

(a)

Where total income computed by the A.O. is up to Rs. 1 lakh.

 

Rs. 500/-

(b)

Where total income computed is between Rs. 1,00,000/- and Rs. 2,00,000/-

Rs. 1,500/-

(c)

On total income exceeding Rs. 2,00,000/- at 1% of the assessed income, subject to a maximum of

Rs. 10,000/-.

(d)

Where subject matter of appeal relates to any other matter

Rs. 500/-

(e)

Stay Application under Rule 35A

Rs. 500/-

(f)

Rectification application under s. 254(2)

Rs. 50/-

(g)

On appeal by the Revenue and Cross Objections by the assessee

Rs. NIL

The Hyderabad Bench of ITAT in Andhra Pradesh State Electricity Board vs. ITO (1994) 49 ITD 552 has held that (i) income computed by the A.O. alone has to be seen and not income after appeal effect; (ii) total income should be arrived at after

12

set off of unabsorbed losses, unabsorbed depreciation etc.; (iii) Loss is negative income and would be considered as income; and (iv) Agricultural income is to be excluded for computation of total income. Also see Tapan Kumar Saha vs. ITO (2004) 83 TTJ 350 (Calcutta Bench).

The Mumbai Tribunal in M/s. Narendra Valji Shah vs. ACIT – ITA No. 3545/Mum./99, A.Y. 1995-96, Bench ‘C’, order dated 24-5-2000 held that the levy of penalty under s. 271B is not in any way related to the total income but is related to the total turnover and hence, the appeal fees would be Rs. 500/- only. The Mumbai Bench in Amruta Enterprises vs. DCIT (2003) 84 ITD 172 has held that the quantum

of penalty under s. 271(1)(c) could not be linked with assessed income, hence, the fee payable shall be Rs. 500/- and not based on total income computed by the A.O. Thus, Tribunal fee payable in respect of appeal against penalty levied under different

be

Rs. 500/- only. In Seahorse Ship Agencies Pvt. Ltd. vs. Dy. CIT, ITA No. 101/Mum/2001, Bench ‘H’ dated 15-3-2002, the Tribunal held that, in respect of appeal filed relating to penalty levied under section 158BFA(2), the Tribunal fees will be only Rs. 500/-. In Vinod Khatri vs. ACIT, Delhi Special Bench (2004) 82 TTJ 911 held that the filing fee for appeal before Tribunal against penalty under s. 271(1)(c) is governed by clause (d) of section 253(6) and not by clauses (a), (b) and (c) thereof. Thus fee shall be Rs. 500/- only. This is also clarified by the CBDT Circular No. 779 dated 14-9-1999 (1999) 240 ITR St. 3 while adding clause (4).

sections

shall

If a single application for stay of recovery is made to ITAT for a number of

under

assessment years, then

s. 253(7) would be Rs. 500/- only and not Rs. 500/- per assessment year –

Chiranjilal S. Goenka vs. WTO (2000) 66 TTJ 728 (Mum).

the

filing

fees

payable

In Mrs. Nimu R. Thadani vs. Jt. CIT, ITA No. 5437/Mum/97, A.Y. 1996-97, order dated 11-2-2000, the Tribunal has held that in cases of appeals filed in respect of interest levied under s. 234A, 234B, 234C or any other interest, clause (d) of section 253(6) would be applicable and the appeal fee would be Rs. 500/- because interest is in no way related to the assessed income, but linked with the tax payable.

In Chromatic India Ltd. vs. ITO, ITA Nos. 3486/M/2001 and 3487/M/2001, Bench ‘D’ dated 12-12-2002, the Mumbai Tribunal has held that appeal fee against the order under section 263 is Rs. 500/- only.

Q.29

Ans. The assessee should make an application before the Tribunal for claiming the refund and at the hearing of appeal, the Members will pass an appropriate order and the assessee can get the refund. The request for refund can be made orally also at the time of hearing. Refund voucher shall be issued by the Assessing Officer. On his failure, the assessee may approach the higher authorities or file a writ.

If assessee has paid more appeal fees, how can he claim a refund?

Q.30

Whether challan for payment of Tribunal fee has to be obtained from the Assessing Officer?

Ans.

The appellant need not obtain challan from the Assessing Officer. The appeal fees can be paid in any challan stating “The Tribunal fees” and giving the reference of the

assessment

year.

In

case

of

urgency and

on the last day of limitation, the fee can be deposited in cash with the Tribunal.

Q.31

Where can an appeal be presented?

 

Ans.

As per Order No. 1 of 1973 dated 10th July, 1973, [(F. No. F-161-AD(AT)/70)) (1973) 90 ITR (St.) 25] the Registrar of the Income-tax Appellate Tribunal has authorised

13

the Assistant Registrars of the Appellate Tribunal situated at different places to be the authorised officers to receive appeals or applications. In his absence from office, the appeal may be presented to the Superintendent / Asst. Superintendent / Seniormost Head Clerk at the Tribunal’s office during office hours. In the event the period of limitation for presentation of the appeal is expiring, the appellant may present it to the respective Assistant Registrar at his residence or any other place, wherever he may be or to a Member of the Tribunal at his residence or wherever he or she may be.

Q.32 Whether the appeal can be sent by registered post?

Ans. Yes. It is advisable if the appeal is being sent through post, that it should be sent through Registered A.D. addressed to the Registrar or other authorised officer of the Tribunal. However, the point to be noted is that it must reach the authorised officer within the period of limitation because it shall be deemed to have been presented on the day on which it is received in the office of the Tribunal. Any delay in transmission by post may not be excluded in computing the period of limitation, as the postal authorities are not considered as agents of the addressee but they are agents of the sender. [F. N. Roy vs. Collector of Customs AIR 1957 (SC) 648]. However, if postal authority has taken abnormal time for delivery, an application for condonation would have to be filed. It may be considered as sufficient cause.

Q.33

Whether appeal against an order passed by an authority in Pune or Delhi can be filed at Mumbai?

Ans. The appeal relating to a Pune or Delhi case can be filed at Mumbai, if it is getting time barred and in such cases the Mumbai Tribunal after receiving the appeal forwards the appeal papers to the concerned Bench. Tribunal, though functioning at different places is one institution.

Q.34 What is meant by cross objection?

Ans. If the assessee or the Assessing Officer prefers an appeal to the Tribunal, and the appeal is not rejected under Rule 12 of the ITAT Rules, 1963, a notice is given by the Tribunal to the respondent informing him of the fact of such filing, also enclosing the memorandum and grounds of appeal. The respondent can file, under s.253(4), a memorandum of cross objections in Form No. 36A, within 30 days from the date of receipt of such notice, against any part of the order of the first appellate authority deciding any issue against him. The respondent is not required to pay any filing fees and the Tribunal shall dispose of such memorandum of cross objections as if it were an appeal. Such cross objections is registered and numbered as an appeal and all the rules, so far as may be, shall apply to such appeal. It has to be heard along with the appeal and disposed of by a common order. There is no difference between an appeal and a cross objection [CIT vs. Purbanchal Paribhan Gosthi (1998) 234 ITR 663 (Guwahati)]. The Pune Bench of ITAT in Asst. Commissioner vs. Kripa Chemicals (P) Ltd., (2002) 82 ITD 449 held that even where the appeal is withdrawn or is dismissed for default, cross-objections may nevertheless be heard and determined. It relied on the Superintendent Engineer vs. B. Subba Reddy AIR 1999 SCW 1479. Rule 27 of the ITAT Rules, 1963, empowers the respondent to the order appealed against to support the same on any of the grounds decided against him, though he may not have appealed or filed a cross objection. CIT vs. BPL Systems & Projects Ltd. (1997) 227 ITR 779 (Kerala). However, filing of cross-objection is advisable and such valuable right should be exercised vigilantly. Cross objector is an appellant and not an intervener.

Q.35 Can cross objection be filed belatedly?

14

Ans. If the respondent is able to satisfy the Bench that the delay in filing of the cross objection was due to good, sufficient or reasonable cause, the Tribunal can condone the delay and admit the cross objection. The cross-objector should file application for condonation of delay.

Q.36

Ans. When the assessee and the Revenue prefer appeals against the same order, such appeals are considered as cross appeals. In substance there is no difference between cross objection and cross appeal. CIT vs. Purbancha Paribahan Gosthi (1998) 234 ITR 663 (Guwahati)

Q.37

Ans. The respondent in the appeal filed by the assessee should always be the Assessing Officer concerned, who has jurisdiction over the case on the material date. In the appeal filed by the Income Tax Officer / Assessing Officer, the assessee is made the respondent.

What is meant by cross appeal?

Who should be the respondent in appeal or cross objection?

Q.38

Who is authorised to sign the appeal or cross objection?

Ans.

As prescribed in s. 253(b) read with Rule 47 an appeal or application must be signed by:–

 

In case of appeal/cross objection

Firm

To be signed by

preferred by Individual HUF

Himself Karta and in his absence from India, by any other adult member of the family Managing Partner, in the alternative,

Local authority Association of Persons

Partner Principal Officer Member of the Association or the

Company

Principal Officer. Managing Director or the Director

Non Resident company Government managed company

or Liquidator Power of Attorney holder Principal Officer thereof

If an individual assessee is absent from India, the appeal memo may be signed by the authorized person, if mentally incapacitated, by the guardian or any person competent to act on his behalf; and if for any other reason, it is not possible for the individual to sign, by any person duly authorized by him in this behalf. A valid power of attorney from the individual should be attached to the appeal. In the case of a company, the appeal has to be signed by the Managing Director of the company. An Advocate cannot sign the memo of appeal on behalf of an appellant. There is a column for additional signature of the Authorised representative. An Advocate / Authorised Representative should sign in that capacity. Vakalatnama / Power of Attorney should be submitted with the memo of appeal.

Q.39

Can an Executive Director sign the appeal memo before the Tribunal?

15

In the case of company, it is the Managing Director who is authorized to file an appeal memo before the Tribunal. In cases where the Managing Director is not available, the Executive Director can sign the appeal memo. Appeal memo signed by the Executive Director is a curable defect if a reasonable cause is shown before the Tribunal. In National Insurance Co. Ltd. vs. CIT (1995) 213 ITR 862 (Cal.), the Court held that, the return signed by a Director and not by the Managing Director was invalid in the absence of any explanation. An appeal cannot be dismissed without giving an opportunity to cure the said defect, Malani Trading Co. vs. CIT (2001) 252 ITR 670 (Bom.) Defective memo of appeal can be cured (2004) 186 CTR 162 (P & H), (2003) 264 ITR 313, CIT vs. V. K. Sood Engineers Contractors (P) Ltd.

Q.40

Whether signing of appeal by a person other than specified is curable?

Ans.

There are divergent views on the issue as to whether a defect in signature would render the appeal a nullity. The Hon’ble Calcutta High Court in Sheonath Singh vs. CIT (1958) 33 ITR 591 has held that the absence of or defect in the signature of the appellant is not fatal so as to render the appeal a nullity and it is an irregularity which can be rectified and will be treated as having been rectified retrospectively. Whereas the Hon’ble Allahabad High Court in Special Manager, Court of Wards, Naraindas Narsinghdas vs. CIT (1950) 18 ITR 204 has taken a contrary view and held that where the signature on the appeal was that of an agent, the appeal filed was invalid. In the following cases, it has been held that an appeal signed by an Advocate / C.A. / any other person is curable. Mrs. Luiza Saldanha vs. CIT (1983) 16 TTJ 243 (Bom), Pyrkes Win Stores vs. ITO (1984) 9 ITD 93 (Bom), Harileles vs. ITO (1986) 29 Taxman 22 (Bom) (Trib), Rajendrakumar Maneklal Sheth (HUF) vs. CIT (1995) 213 ITR 715 (Guj). It is advisable to file fresh memo of appeal along with an application for condonation of delay.

Q.41

Whether undisputed tax should be paid before filing an appeal?

Ans.

Section 249(4) provides that no appeal shall be entertained under Chapter XX unless at the time of filing the appeal the assessee has paid the taxes due on the returned income or where no return is filed, an amount equal to the amount of advance tax which was payable by him. Filing of appeal before Tribunal also falls under this chapter, hence provisions of section 249(4) are applicable. The Chennai Bench in V. Baskaran vs. ACIT (1998) 62 TTJ 698 held that right of appeal is a creature of statute and the appellant must comply with the conditions or requirements for admission and for consideration of an appeal.

The Appellate Authority is vested with the power to exempt an assessee from the above condition of payment of tax. If the assessee makes an application and is able to show good and sufficient reasons, as to why he should be exempted from the operation of section 249(4), he can be allowed to file after recording the reasons in writing. An order refusing to exercise such discretion is an appealable order — CIT vs. Smt. Nanhibai Jaiswal 171 ITR 646 (M.P.) In Shri Parasram G. Purohit vs. ACIT, ITA No. 2689/Bom/93, Assessment Year 1989-90, the Hon’ble Bombay Tribunal, held that once the tax required to be paid u/s. 249(4) has been paid before the final date of hearing, it is incumbent upon the appellate authority to consider the appeal as having been filed on the date of payment. (Decision of Supreme Court in CIT vs. Filmistan 42 ITR 163 referred to). In Bharatkumar Sekhsaria vs. Dy. CIT (2002) 82 ITD 512 (Bom.), the Tribunal held that when amount of the tax due is not paid before filing the appeal, the assessee’s appeal is not maintainable. It may be noted that the Bombay High Court admitted the appeal filed against the order of the Tribunal. However, in a latter decision in the case of Umesh Popatlal Shah vs. DCIT & Others IT (SS) A. No. 42 to 44/M/2000, the Bombay Tribunal distinguished the decision of

16

Sekhsaria and held that the appeal should be treated as belated till the fees was paid and consequently condonation of delay to be considered. In CIT vs. Smt. G. A. Smanthakamani (2002) 125 Taxman 424 (Mad.), the Court held that, section 249(4) cannot be read down so as to restrict it to appeal against assessment only, it will be applicable in case of appeal against penalty also. In ITO vs. Tata Iron & Steel Co. Ltd. (2001) 71 ITD 323 (Cal.), the Tribunal held that, appeal is not maintainable where tax is not deducted at source from payment made to non- resident and is not paid to Government, prior to filing of appeal. In Pawan Kumar Ladha vs. Asstt. CIT (2003) 84 ITD 178 (Indore) & Malva Texturising (P) Ltd. vs. Asstt. CIT (2002) 77 TTJ (Indore) 995, the Tribunal has taken the view that provisions of section 249(4)(a) falling under Chapter XXA are not applicable to the appeals filed before the Tribunal. In Anil Sanghi vs. Asstt. CIT (2003) 85 ITD 73 (Delhi) SB, the Tribunal has held that for the period 1-7-1995 to 31-12-1996 during which provisions for first appeal in respect of block assessment was filed provisions of section 249(4) were not applicable.

Q.42

Assessee has paid the tax, but not interest u/s. 234A, 234B, 234C,

Ans.

whether appeal is maintainable? In Subbaiah Nadar & Sons vs. Asst. CIT (2003) 84 ITD 55 (Chennai), the Tribunal has held that section 249(4), refers only to tax and not interest, hence, the appeal cannot be dismissed for non payment of interest.

Q.43

If an order is setaside with a specific direction and no appeal is filed

against the direction. Can the direction be challenged in Second Appeal? Ans. Once the direction is given, the same has to be followed by the assessing officer. If no appeal is preferred against the said direction, such direction is binding on the Assessing Officer and he should follow the direction of the superior authority. The officer cannot go beyond the specific direction of the appellate authority. The direction can be challenged before the Tribunal by taking additional ground. On satisfaction, additional ground can be permitted by the Tribunal. Cawnpore Chemical Works P. Ltd. vs. CIT (1992) 197 ITR 296 (All.), CIT vs. S. V. Divakar (1993) 201 ITR 914 (Orissa)

Q.44

assessment order is based on report of the valuation officer? Ans. Yes. It is mandatory for the appellate authority to give notice of hearing to valuation officer. If notice is not given, the Tribunal will set aside the matter to follow the statutory requirement. The Tribunal is also required to give notice to the valuation officer

Q.45 Whether a concession of law is binding?

Ans. A concession of law made by an assessee or his authorized representative is not binding. There cannot be any estoppel against statute. Rani Anand Kunvar vs. CIT (1940) 8 ITR 126 (Oudh), Gouri Sahai Ghisa Ram vs. CIT (1979) 120 ITR 338 (All), CIT vs. Archana R. Dhanwatay (1982) 136 ITR 355 (Bom.), Narsepalli Oil Mills vs. State of Mysore (1973) 32 STC 599 (Mad.) Central Council for Research in Ayurveda & Siddha vs. Dr. K. Shankara Kumari (2001) 5 SCC 60, CIT vs. Mahalaxmi Sugar Mills Co. Ltd. (1986) 160 ITR 920 (SC) at (928). Inclusion in return of sales, not assessable to tax assessment of such sales. Appeal not barred – doctrine of estoppel not applicable, (2004) 136 STC 292 (Kar) Bhandari Metals & Alloys (P) Ltd. vs. State of Kerala.

Whether it is mandatory to give notice to valuation officer, when

17

In ITO vs. Estate of Late K. S. Engineer (2001) 70 TTJ 161 (Bom), the Tribunal held that, a receipt cannot be taxed merely because assessee has offered the same for assessment or that he has not challenged similar assessment in earlier years. In Ark Investment Ltd. vs. ITO (1985) 13 ITD 65 (Mad), the Tribunal has held that, even if the assessee shows the income taxable, he can file an appeal and such appeal must be disposed on merit.

Q.46

Can an appeal be filed against an order under s. 264 or 273A of the Income-tax Act?

Ans.

No appeal lies to the Tribunal. The only remedy is by way of a writ before the High Court under Article 226 of the Constitution of India.

Q.47

Whether an appeal can be filed against a dead person?

Ans. No. No appeal can be filed against a dead person. The Court held that the appeal filed by the Department against a dead person is liable to be dismissed. In CIT vs. Smt. Santosh Rani (1996) 219 ITR 301(MP). Appeal can be filed after bringing the legal heirs on records.

Q.48

Whether disputes of levy of tax, interest or penalty, in respect of public sector undertaking can be decided by the Tribunal?

Ans. Disputes between Tax Department and public sector undertaking must be referred to Cabinet Committee. Only after, getting the approval, the Tribunal can proceed with the matter. Oil & Natural Gas Commission vs. CCE (1992) 104 CTR 31 (SC); [ITO vs. Indian Airlines Ltd. (1998) 99 Taxman 332 (Mad.) (Mag.)]. Recently, in cases where the approval has not been obtained for a considerable time and the matter has been adjourned several times, the Tribunal has been dismissing the appeal with liberty to apply for restoration when the approval is received. The purpose is to see that frivolous litigation between Government Departments and Public Sector Undertakings should not be dragged in the Courts; CCE vs. Jeesop & Co. Ltd. (1999) 9 SCC 181; Canara Bank vs. National Thermal Power Corporation (2001) 1 SCC 43 (2001) 104 Comp Cas 97. Decision taken by the Committee shall be binding on all the departments – Mahanagar Telephone Nigam Ltd. vs. CBDT (2004) 267 ITR 647 (SC).

Q.49

Whether appeal can be decided ex parte on the ground of non-filing of Power of Attorney or Vakalatnama?

Ans. In Prayas Agag Udyog (P.) Ltd. vs. ITAT (2001) 118 Taxman 68 (All.), the Court held that, the Tribunal cannot dispose of an appeal ex parte on the ground that, the Chartered Accountant who moved an application for adjournment had no Power of Attorney or Vakalatnama, authorizing him to represent the petitioner. The Tribunal should have brought the defect to the notice of the petitioner and got the defect removed.

Q.50

Whether appeal can be dismissed by the Tribunal in Limine for not attaching the grounds of appeal?

Ans. In CIT vs. V. K. Sood Engineers & Contractors (P) Ltd. (2003) 264 ITR 313 (P & H), the Court held that the Tribunal was not right in dismissing the appeal in limine, since it is a rectifiable defect.

18

CHAPTER

3

APPEAL FORM AND CONTENTS

Q.51

Ans. As per Rule 8 of the Rules, the grounds of appeal should be concise and under different heads. Grounds of appeal should not be argumentative or narrative. Such grounds should be numbered consecutively. Grounds should be drafted very carefully, the point in dispute be highlighted. It is desirable to challenge findings of facts which are contrary to the material on record or are objected to. On receipt of defect memo, grounds originally filed can be substituted. If ground is not comprehensive, the Respondent/Tribunal may object at the final hearing and may not allow to raise additional ground. If ground is exhaustive and framed in general words – all aspects can be argued. See CIT vs. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 (SC); CIT vs. Birad Kanwarji (HH) (1979) 119 ITR 96 (Raj.).

The statement of facts should be filed before the Commissioner of Income-tax (A). It is very vital for assessees to present the statement of facts in such a manner so as to bring out clearly the issues in the assessment/penalty proceedings which are under challenge. There is no requirement of filing statement of facts before the Appellate Tribunal. But copy of statement of facts filed before the CIT(A) should be annexed.

Q.52 Whether additional ground can be filed at the time of hearing of appeal?

Ans.

How to draft the grounds of appeal or cross objection?

Rule 11 of the Rules, provide that the appellant, shall not except by leave of Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal. However, the Tribunal is competent to allow the appellant to raise, at the hearing of the appeal, an additional ground even without a formal amendment of the memorandum of appeal (CIT vs. Nelliappan (1967) 66 ITR 722 (SC). New India Life Ass. Co. Ltd. vs. CIT (1957) 31 ITR 844, 846 (Bom.)

The appellant should make an application in writing containing the additional ground, its necessity and reasons as to why it could not be taken earlier. It should be established that it goes to the root of the issue and is necessary for dispensation of justice. A copy of such application should be provided to the respondent and respondent is heard, before its disposal. Permission to raise the additional ground is discretionary. Reasons for admission have to be recorded by the Tribunal and the discretion should be exercised judiciously so as to further the cause of justice and not arbitrarily.

In Ahmedabad Electricity Co. Ltd. vs. CIT (1993) 199 ITR 351 (Bom) (FB), the Court held that, Rules 11 and 29 of the Appellate Tribunal Rules indicate that the scope of enquiry before the Tribunal can be wider than the points which are raised before the Tribunal. The Tribunal, therefore, would ordinarily have the power to allow additional points to be raised before it so long as they arise from the subject matter of the proceedings. The proceedings before the Tribunal are not necessarily confined only to the subject matter raised in the memorandum of appeal. The word “thereon” in section 254 does not in any manner restrict the jurisdiction of the Appellate Tribunal. The word “thereon” merely refers to the appeal. To read the word “thereon” as restricting the jurisdiction of the Appellate Tribunal is not warranted. It does not refer to the scope of jurisdiction at all. The words which prescribe the extent of

19

jurisdiction of the Tribunal under section 254 are the words “may pass such orders as it thinks fit”. These are the words which describe the jurisdiction of the Appellate Tribunal. The word “thereon” merely refers to the fact that the Tribunal while deciding the appeal has to exercise its jurisdiction. Looked at from a slightly different point of view, if the word “thereon” can be said to refer to the subject matter of the appeal, then the subject matter of the appeal is the entire tax proceeding of the assessee which is before the Tribunal for consideration; and this will cover the proceedings before the ITO, before the AAC as well as before the Tribunal — including the grounds raised before the Tribunal, any additional grounds which may be allowed to be raised before the Tribunal as also cross-objections, if any, before the Tribunal. Undoubtedly, the Tribunal has a discretion to decide whether any additional points can be allowed to be raised at the stage of appeal before it, and it may not permit such a new point to be raised for good reasons. But the extent of jurisdiction of the Tribunal is not confined only to points which were considered by the AAC and which may be challenged in appeal before the Tribunal. The Tribunal can permit other grounds also to be raised before it, provided, of course, that they arise out of the proceedings. Accordingly, it can be said that, the Tribunal has jurisdiction to permit additional grounds to be raised before it even though they may not arise from the order of AAC, as long as these grounds are in respect of the subject matter of the entire tax proceedings.

So far as legal issues are concerned, additional grounds can be raised at any time. Few case laws on the subject of power to allow a new ground of appeal to be raised are: National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC), Jute Corporation of India vs. CIT (1991) 187 ITR 688 (SC), Godavari Sugar Mills Ltd. vs. CIT (1993) 199 ITR 351 (Bom) (FB), Ramgopal Ganpatrai & Sons vs. CIT (1953) 24 ITR 362 (372) (Bom), Anam Venkata Krishna Reddy vs. CIT (1988) 172 ITR 425 (A.P.), Deep Chand Kothari vs. CIT (1988) 171 ITR 381 (Raj), J. S. Parkar vs. V. B. Palekar (1974) 94 ITR 616 (Bom), CIT vs. Stepwell Industries Ltd. (1997) 228 ITR 171 & 463 (SC), ACIT vs. Soni Photo Films (P) Ltd. (1998) 67 ITD 81 (SB), CIT vs. Delhi Sanitary Stores (1981) 127 ITR 822 (Raj.)

Q.53

Ans. Leave to urge additional grounds may be sought either in writing or by oral prayer. Rule 11 of the Appellate Tribunal Rules speaks only of leave and the leave may be sought either in writing or by an oral prayer — Amines Plasticizers Ltd. vs. CIT, (1997) 223 ITR 173 (Guwahati). Grounds of Appeal can be amended by taking leave of the Tribunal orally — Assam Carbon Products Ltd. vs. CIT (1997) 224 ITR 57 (Guwahati). There is no particular form for raising an additional ground. Baby Samuel vs. ACIT (2003) 262 ITR 385 (Bom.). The additional ground can be raised at any time. Shilpa Associate vs. ITO (2003) 263 ITR 317 (Raj.). New plea can be raised orally though no cross objection or appeal has been filed, Assam Company (India) Ltd. vs. CIT (2002) 256 ITR 423 (Guwahati), Baby Samuel vs. ACIT (2003) 262 ITR 385 (Bom.)

Q.54

Whether additional ground can be raised orally?

Whether issues regarding jurisdiction or limitation not raised before the CIT (A) can be raised for first time before the Income Tax Appellate Tribunal?

Ans. Yes. Legal ground going to the root of the issue and if facts are on record, can be raised at any time. In CIT vs. Mohd. Iqbal and Others (1996) 221 ITR 481 (MP) Krishna Gopal Bhadra vs. ITO (1980) 124 ITR 580 (Cal.), CIT vs. Commonwealth Trust (India) Ltd. (1996) 221 ITR 474 (Ker.) CF Town Municipal Council Atharia vs. Labour Court AIR 1969 SC, 1335 (1338) courts have held that the question of

20

limitation can be raised at any point of time because it goes to the root of the matter. Similar is the position about the jurisdiction. The Supreme Court in UOI vs. British India Corp. Ltd. (2004) 268 ITR 481 observed, the question of limitation is a mandate to the forum and irrespective of the fact whether it was raised or not, the forum must consider and apply it, if there is no dispute or facts.

Q.55

Whether assessee can raise a ground regarding jurisdiction in respect of the assessement in the penalty appeal at any time?

Ans.

The assessee is entitled to raise the ground relating to jurisdiction stating that the assessment based on the return is bad in law, hence penalty is liable to be quashed — Union of India vs. Rai Singh D. L. Singh Bist (1973) 88 ITR 200 (SC), CIT vs. Dumraon Cold Storage and Refrigeration Service (1974) 97 ITR 137 (Patna), Shri Bhormal Aidanmali Jain vs. IAC of I.T. [No.9204 and 9205 — assessment year 1977-78, Bench “E”, dated November 23, 1989 (SMC)], Sanabhai R. Dalwali vs. ITO (1990) 34 ITD 183 (Ahd.).

Q.56 Can assessee support the order of Commissioner of Income Tax (Appeals) on any ground decided against it, even though no appeal is filed?

Ans.

In Dy. CIT vs. Smithkline Beecham Consumer Brands Ltd. (2003) 126 Taxmann 104 (Cal.), the Tribunal held that, in view of Rule 28 of Income Tax (Appellate Tribunal) Rules, assessee can support order of Commissioner (Appeals) on any ground decided against it even though no appeal is filed.

Q.57

Can appellant agitate the issue not pressed before the CIT(A)?

Ans. Yes. An appellant despite having not pressed an issue before the authorities below, can still raise and agitate the same before the Tribunal. There cannot be any estoppel against statute. No concession on law is permissible. Vijay Kumar Jain vs. CIT (1975) 99 ITR 349 (P&H); J. K. Oil Mills Co. Ltd. vs. CIT (1976) 105 ITR 53 (Allahabad); Hindusthan Zinc Ltd. vs. DCT (2002) 77 TTJ 315 (Jodhpur Bench).

21

CHAPTER

4

ADDITIONAL EVIDENCE

Q.58

Whether evidence which was not filed before the lower authorities can be filed before the Tribunal?

Ans. Rule 29 places a total bar on the parties to the appeal from producing additional evidence, either oral or documentary, before the Tribunal. But Tribunal has been vested with inherent discretion to allow the production of the additional evidence in the following circumstances:–

(i)

If the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause;

(ii)

If the Income-tax authorities have decided the case without giving sufficient opportunity to the assessee to advance evidence either on points specified by them, or not specified by them.

On the existence of either of the circumstances mentioned above, the Tribunal for reasons to be recorded may allow such documents to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. The Tribunal has the discretion to permit to adduce additional evidence.

ITO vs. B. N. Bhattacharya (1978) 112 ITR 423, 427 (Cal.), CIT vs. Motilal Hirabhai Spinning & Wvg. Co. Ltd. (1978) 113 ITR 173, 179, 180 (Guj). CIT vs. Smt. Kamal C. Mehboobhani (1995) 214 ITR 15 (Bom), Dy. CIT vs. Vira Construction Co. (1997) 61 ITD 33 (Mum) (TM)

If evidence produced by assessee is genuine, reliable and proves assessee’s case, then assessee should not be denied opportunity of it being produced for the first time before the appellate authority—

Jagbir Singh vs. ITO (1987) 23 ITD 15 (Del.), Electra (Jaipur) (P) Ltd. vs. IAC (1988) 26 ITD 236 (Del.), Smt. Prabhavati S. Shah vs. CIT (1998) 231 ITR 1 (Bom), Abhay Kumar Shroff vs. ITO (1997) 63 ITD 144 (Patna) (TM), Jagannath Prasad Kanhaiya Lal Vs. CIT (1988) 171 ITR 596 (Alla.), CIT vs. Gani Bhai Wanab Bhai (1998) 232 ITR 900 (M.P), Deep Chand Kothari vs. CIT (1988) 171 ITR 381 (Raj.), Controller of Estate Duty vs. Narasamma (1980) 125 ITR 196 (A.P.)

What is the meaning of additional evidence and procedure to adduce

additional evidence? Ans. Any evidence which has not been produced before the Assessing Officer or Commissioner of Income Tax (Appeals) shall be considered as additional evidence. There is a distinction between additional evidence and supporting evidence. If

Q.59

22

certain material / evidence has been placed before the lower authorities and further supporting evidence is placed before the Tribunal – it should not be considered as additional evidence. However, narrow difference exists between the two. The appellant should make an application seeking permission to rely upon additional evidence. The application should give reasons, justify the necessity, prove its genuineness, its non-availability earlier or that there was no negligence, mala fides and latches or inaction on the part of the appellant for not producing it before the lower authorities. The additional evidence should be annexed with the application and by way of an additional paper book. If possible, it should be supported by an affidavit of the appellant. Its copy has to be provided to the respondent and the respondent should be given an opportunity of being heard. On being satisfied, the Tribunal should record its reasons, admit and consider at the time of final hearing. If the Tribunal fails to consider such evidence or the application, it amounts to a mistake rectifiable under s. 254 (2) and the matter must be restored to the Tribunal to dispose of the application as held by the Supreme Court in Jyotsna Suri & Others vs. ITAT (2003) 179 CTR 265 (SC).

Whether assessment orders or Government records can be considered as

additional evidence? Ans. Assessment orders cannot be considered as additional evidence. However, the assessee may seek leave of the Tribunal to produce and rely upon the assessment order if it has not been produced before the lower authorities, and is being produced for the first time and permission may be given to produce the same. As per section 74 of the Evidence Act the Government records are considered as public documents. Hence the same can be produced for the first time before the Tribunal with the permission of the Bench.

Q.60

23

CHAPTER

5

DUTIES OF THE TRIBUNAL

Q.61

What are the duties of the Tribunal?

Ans.

Strictly speaking the Appellate Tribunal is not a Court but has all the trappings of the Court of law. The Appellate Tribunal performs judicial act in judicious manner. The Tribunal is the final fact finding authority. Its finding on facts is final and no appeal lies to the Hon’ble High Court. The powers of the Appellate Tribunal are very wide but there is no power of enhancement. All questions, whether of law or of fact which relate to the assessment of an assessee may be raised before the Tribunal. In disposing of the appeal, the Tribunal has the power to give appropriate directions and to pass such orders as it thinks fit, after giving an opportunity of being heard to both parties to an appeal. The powers include the power to annul an assessment order or set it aside. The powers have been expressed in the widest possible terms similar to the powers of the Civil Appellate Court u/s. 96 and order 41 of the Code of Civil procedure. Duty is to avoid multiplicity of proceedings and to make a detailed well discussed order after incorporating facts emerging from records, considering the arguments raised by both the parties and the judicial precedents cited at the time of hearing.

The Tribunal being a final fact finding authority has to consider and decide all issues that are brought before it. It cannot decide only one issue arising out of many issues and decline to go into the other issues raised before it on the ground that further issues will not arise in view of the finding on the issue decided by it. If the Tribunal declines to consider and decide the other issues it will only protract and delay the proceedings for the assessee has to get the decision of the Tribunal on the initial point set aside by approaching the High Court and thereafter, again go back to the Tribunal for a decision on other issues left undecided by it earlier. This will amount to multiplicity of proceedings. It is desirable that the Tribunal should avoid disposing of matters on preliminary issues alone, without deciding all the issues raised before it and it should, as far as possible express its view on all points raised before it, so that the higher Courts have the benefit of its decision on other points also, if necessary.

Some relevant case laws on the subject are:

The Tribunal must consider all the material and not only a part of it.

Udhavdas Kewalram vs. CIT (1967) 66 ITR 462 (SC)

It is not only the duty of the Tribunal to examine the material facts but also to come to a legal conclusion that the facts do not justify the allowance or disallowance of an expenditure.

CIT vs. Turner Morrison & Co. (P) Ltd. (1974) 93 ITR 385 (Cal).

The Tribunal should not rest its conclusion merely on legal views without recording findings on matters of facts.

Simhadri Narasingh Prusty & Ors. vs. CIT (1971) 79 ITR 219 (Orissa)

24

The Tribunal being the final authority on facts, it is necessary and it is the requisite of the law that in disposing the appeal, it clearly sets out the facts, the contentions of the assessee as well as the revenue and deals with each of such contentions with reference to the facts, circumstances and relative evidence and records its findings with reasons therefor on each contention.

E. A. Venkataramier & Sons vs. CIT (1967) 65 ITR 316 (Mad)

The Tribunal is under a duty to decide all questions of fact and law raised in the appeal before it. For the purpose it must consider whether on the materials relied upon by the assessee his plea is made out. The Tribunal cannot make arbitrary decisions; it cannot base its judgements on conjectures, surmises or speculation. Between the claims of the public revenue and of the tax-payers, Tribunal must maintain a judicial balance.

Esthuri Aswathiah vs. CIT (1967) 66 ITR 478 (SC)

The Tribunal must decide cases in a judicial spirit and record reasons in support of its decision.

CIT vs. Walchand & Co. (1967) 65 ITR 381 (SC)

The orders of the Tribunal must be self contained and set out in full the facts and the reasons for arriving at a decision. Reference to earlier orders are unhelpful because at the time of hearing, these orders are not placed before the Court and it will not therefore be possible to appreciate the Tribunal’s views in these matters.

CIT vs. Guntur District Co-operative Marketing Society Ltd. (1985) 154 ITR 799 (AP)

On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises or on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings even though on questions of fact will be liable to be set aside by the Court.

Omar Salay Mohamed Sait vs. CIT (1959) 37 ITR 151 (SC)

An order of a judicial authority like that of the Appellate Tribunal is a solemn one and the Tribunal should devote great care in expressing it.

M.R.M. Periannan Chettiar vs. CIT (1960) 39 ITR 159 (Mad)

The order of the Tribunal should embody a complete picture of what happens at the hearing. If a point is argued it should be dealt with and disposed of in express terms however weak the argument or baseless the contention. The Tribunal being the final fact finding authority it is desirable that its views on facts should be stated comprehensively to cover all points in controversy. Omissions in the order can give rise to questions of law.

Senairam Dongarmal vs. CIT (1956) 29 ITR 122 (Assam)

The Tribunal in deciding a case should not be unduly influenced by trivial procedural technicalities. The memo of appeal should be liberally seen and entertained. No specific formula is necessary for seeking relief at the hands of a Court or Tribunal, if the necessary grounds have been taken in the appeal memo. CIT vs. Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC).

25

In

Manibyrabha vs. CIT (2004) 265 ITR 560 (Ker), the Court held that it is the duty

of

the Tribunal to pass a reasoned order, in this case the Hon’ble Tribunal has not

discussed the cases cited before it. The Hon’ble High Court set aside the order of the

Tribunal.

It is the duty of the Tribunal being the highest appellate Tribunal exercising the

appellate jurisdiction under the I.T. Act to examine the issue, both of law and fact in right perspective and in detail. It must appear from the order passed by the Tribunal that sincere efforts were made to decide the issue that fell for examination, keeping

in view the law laid down by Apex Court in its right earnest. Mere reference of a

citation in the order for recording a finding is not enough. It is never regarded as a case observing judicial discipline. Any finding whether on facts or in law if recorded cursorily and without assigning reasons can never be regarded as judicial finding. It

is incapable of being sustained in higher courts in heirarchy. Shreejee Chitra Mandir

vs. CIT (2004) 269 ITR 55 (M.P.).

During the last few years, it has been noticed that some Members of the Tribunal interrupt, do not give patient hearing and want counsels to curtail their submissions/arguments though appropriate on the issues involved in the wisdom of the arguing counsel. Some orders are brief, do not set out the arguments made on

both sides, their analysis and discussion on the citations. Such attitude on the part of some of the Hon’ble Members spoil the image and reduce past glory of the Tribunal.

A representation was made by the Federation and corrective measures are being

taken by the President. The speeches of Shri A. Kalyanasundharam, Senior Vice President on “Conventions in the Tribunal” and of Shri J. P. Bengra, Vice President on “A Time to Introspect” at the Members meeting (87 ITD Special Issue page 13-19

and 29-34 respectively) lay down the guidelines and are inspiring and call upon Members to perform their duty in a judicious manner with smile and dispense justice.

Q.62

Whether right of an assessee is restricted to the plea raised by him?

Ans

The right of an assessee is not restricted to the plea raised by him. It is the duty of the authority to allow relief on any other ground, if permissible. Ciba of India Ltd. vs. CIT (1993) 202 ITR 1 (Bom), CIT vs. Mahalaxmi Textiles Ltd. (1967) 66ITR 710 (SC).

Q.63

When the assessee and the Department are in appeal, against the same order whether both the appeals must be heard together?

Ans. Yes. In CST vs. Vijai Int. Udyog (1985) 152 ITR 111 (SC), the Supreme Court held that both appeals must be heard together. The Gauhati High Court in CIT vs. Highway Construction Co. 217 ITR 234 (1996) has however held that when the appeals involve different points this can be heard separately. According to us, it is always, desirable

to make an application to hear both the appeals together, mainly because, if assessee

and Department is in appeal, for example on the issue of addition to GP, if appeal of department is dismissed; in assessees appeal, the Department may contend that as the Tribunal has already given the finding, in respect of GP addition, in respect of same point, there cannot be any further relief. It may also be desirable to have only

one order from the Tribunal, otherwise, the assessee or Department may have to file two separate appeals before the High Court for the same assessment year.

Q.64

matter to the assessing officer? Ans. In Berulal Tiwari vs. CIT (1988) 173 ITR 280 (AP), CIT vs. Sati K. Sippy (1992) 195 ITR 276 (Bom), the Courts have held that there cannot be appeal against a set aside order. In our view, if the setting aside is illegal and all the material was available before the CIT (A) an appeal should be preferred and should be entertained by the

Whether appeal can be filed against an order setting aside/restoring the

26

Tribunal. Refer United Commercial Bank vs. CIT (1982) 137 ITR 434 (Cal.), Oriental Paper & Industries vs. State of Orissa 83 STC 202 (Orissa), Raja Vikramaditya Singh (Decd) vs. CIT (1988) 169 ITR 55 (M.P.), Smt. Neena Syal vs. ACIT (1999) 70 ITD 62 (Chd.), Commissioner of Wealth Tax vs. Vanavarayar (M.K.S.) (1980) 122 ITR 184 (Mad.)

Q.65

the principles of natural justice have not been followed? Ans. An order of the lower authorities where the principles of natural justice have not been followed is not void. The Tribunal may have to follow the principles of natural justice or may have to restore the matter back to the lower authority to comply with the principles of natural justice. In view of the Supreme Court decision in Superintendent (Tech.) Central Excise vs. Pratap Rai (1977) 114 ITR 231, an order passed in violation of principles of natural justice does not become bad ab initio, it suffers from intervening irregularly or illegality which can be cured. It does not affect the jurisdiction but only makes further proceedings bad. In Colonisers vs. CIT (1992) 41 ITD 57 (Hyd.) (SB), the Tribunal has held that order passed in violation of natural justice is void ab initio.

Whether an order of the lower authority shall be void or voidable where

The issue of violation of principles of natural justice can be raised for the first time before the Tribunal. Appropriate Authority & Anr. vs. Vijay Kumar Sharma (2001)

249 ITR 554 (SC), Tin Box Company vs. CIT (2001) 249 ITR 216 (SC), Union of

India vs. Vipan Kumar Jain (2003) 260 ITR 1 (SC), J. T. (India) Exports vs. UOI

(2003) 262 ITR 269 (Del.) (FB).

Q.66

Ans. A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute [Municipal Corporation of Delhi vs. Gurnam Kaur, (1989) 1 SCC 101, 110 (SC)]. In other words, when a decision is rendered without noticing a binding precedent or is inconsistent with a statutory provision, it is per incuriam and, therefore, loses its efficacy as a precedent. Except the parties to the lis, it binds none [Per M. N. Rao, J., in Y. V. Anjaneyulu vs. ITO, (1990) 182 ITR 242, 307 (AP)]. The doctrine of per incuriam should be limited to decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the Court concerned [Morelle vs. Wakeling, (1995) 2 QB 379] Wolkem (P) Ltd. vs. CIT (2003) 259 ITR

430 (Raj). The doctrine will not be extended to cases which were merely not fully

argued or which appear to take a wrong view of the authorities or to misinterpret a statute [Mamleshwar Prasad vs. Kanahaiya Lal, AIR 1975 SC 907, 910].

Q.67

What is the doctrine of per incuriam?

Can an issue neither agitated before AO or CIT(A) be agitated before the ITAT?

Ans. The Tribunal should not indulge in technicality of law and the procedure. It is meant to do justice. It should entertain an issue not agitated before AO or CIT(A), if it is a question of law or if the facts are already on records. In case the facts need ascertainment – the Tribunal should not hesitate in remanding to the lower authorities to decide in accordance with law and after opportunity to the other side. In Indo Java & Co. vs. IAC (1989) 30 ITD 161 (Delhi) (SB) the special bench has held that point which can be agitated in appeal before tribunal by an appellant may also include points impinge on computation of income as shown by the assessee himself by mistake or otherwise and even not agitated before ITO or ACC.

Q.68

Whether

proceeding

before

ITAT

is

continuation

of

assessment

proceedings?

27

Ans. Second appeal lies before the Tribunal. An appeal is always a continuation of assessment proceedings. Hence, proceedings before the Tribunal is continuation of assessment proceedings. Whatever could be submitted or agitated before the Assessing Officer can be submitted or agitated or claimed before the Tribunal. In CIT vs. Indian Express (Madurai) Pvt. Ltd. (1983) 140 ITR 705 (Mad.) it was held that the appeal proceedings is also continuation of assessment proceedings to determine the correct assessment, hence, claim which was not made before the CIT(A) can be made before ITAT.

Q.69 Can papers collected after hearing was over be considered as evidence?

Ans. Once hearing is complete, normally no additional papers should be received/collected by the Tribunal. If certain material evidence/document/paper/submission/citation remain to be submitted at the time of hearing, by inadvertent mistake or mistake of the counsel, it shall be appropriate in order to dispense justice, to accept, to provide its copy to the other side and rehear the issue. Without providing opportunity to the other party, it cannot be considered in the order of the Tribunal and cannot be forwarded to the High Court. In Jhalani Tools (I) (P) Ltd. vs. CIT, (1989) 31 ITD 81 (Delhi) (SB) has held that papers which were collected after hearing was over by one of the members suo motu do not constitute evidence hence not forwarded to the High Court.

28

CHAPTER

6

POWERS OF THE TRIBUNAL

Q.70 What is the extent and scope of the powers of the Tribunal?

Ans. The powers of the Tribunal have been expressed in the widest possible terms under section 254, “may after giving both the parties to the appeal an opportunity of being heard, and pass such orders thereon as it thinks fit”. Its powers, thus, are almost similar to the powers of an appellate court under the Code of Civil Procedure. A wide power, however, is not such that it can be exercised in any manner. The Tribunal can interfere with the orders of the lower authorities, but can do so only on judicial considerations and on the basis of reasons that suggest clearly that the lower authorities had committed an error of law or such fact that had vitiated its considerations and gone perverse for such reasons. Its primary task is not to go into the return of the assessee and decide what amount of tax should be levied upon his income, but to see whether the taxing authorities, including the first appellate authority have committed any error of law or of fact and on account of such error, the assessee has suffered. A greater protection is extended by the law to the Revenue in the sense that, in cases where tax is found to have been short levied, discretion is given to the competent authority (Commissioner) to reopen the whole matter, if it is in public interest to do so. The Tribunal has got to protect, on the one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax, in excess of what he is bound to pay, and on the other hand, it has a duty to protect the interests of the Revenue and to see that no one dodged the Revenue and escaped without paying the tax [CIT vs. Rayala Corporation (P) Ltd. (1995) 215 ITR 883, 894, 894-95 (Mad.)]

Some important case laws on the subject of powers of Tribunal are as follows:

The power and jurisdiction of the Tribunal are of wide amplitude and depending upon the exigencies in a given case, it has the power to make such appropriate orders thereon as justice of the case demands. The powers of the Tribunal are expressed in widest possible terms similar to the power of the Appellate Court under section 96 of the Code of Civil Procedure. The words “as it thinks fit” are of wide amplitude to give directions to authorities below, to afford an opportunity to the assessee and revenue to adduce evidence afresh and consider the same and to submit a report.

Thakur V. Hari Prasad vs. CIT (1987) 167 ITR 603 (AP)

The plain implication of the section is that the Tribunal’s powers are limited to passing such order as it may think fit on the appeal. The expression “thereon” clearly and undoubtedly points to the conclusion that the powers of the Appellate Tribunal are limited to the subject matter of the appeal.

Pathikonda Balasubba Setty vs. CIT (1967) 65 ITR 252 (Mys)

Tribunal’s power is limited to the subject matter of the appeal before it. The powers of the Tribunal in dealing with appeals are expressed in section 254(1) in the widest possible terms. The word ‘thereon’ restricts the jurisdiction of the Tribunal to subject

29

matter of the appeal [Hukumchand Mills Ltd. vs. CIT (1967) 63 ITR 232 (236, 237) (SC)]. The power is restricted to the year under appeal, incidental observation relating to other years, if any, made, is not strictly speaking, a finding. The Tribunal has no jurisdiction to give direction with regard to the proceedings of the earlier year or to include deleted amount in an other year’s assessment. ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC).

As the Tribunal has wide powers in respect of subject matter of an appeal before it, it can decide any question which is material to the subject matter before it even though

it was not specifically raised.

CIT vs. Amaredranath Mukherjee & Bros. (1973) TLR 119 (Cal)

The subject matter of an appeal before the Tribunal can only be the decision express or implied of the first appellate authority and the jurisdiction of the Tribunal is restricted to the subject matter of the appeal.

CIT vs. Steel Cast Corporation (1977) 107 ITR 683 (Guj)

Merely because a ground has not been raised before the first appellate authority though it could be raised in support of the relief sought in the appeal, it cannot be said that it cannot be raised before the Tribunal. Such a ground can be raised provided it falls within the contents of the subject matter of the appeal before the first appellate authority.

CIT vs. Cellulose Products of India Ltd. (1985) 151 ITR 499 (Guj) (F.B.)

The word “thereon” confines power of the Tribunal to pass orders on the subject matter of the appeal before it and the Tribunal cannot go beyond the scope of the appeal and pass an order or give a direction which does not fall within the subject matter of the appeal.

F.Y. Khambhaty vs. CIT (1966) 61 ITR 30 (Guj)

Consent does not give jurisdiction to any authority and if there is inherent want of jurisdiction in an authority, failure of the party concerned to challenge the jurisdiction does not confer jurisdiction on the authority. A pure question of law going to the root of the jurisdiction can be raised for the first time before the Tribunal.

CWT vs. N. A. Narielwalla (1980) 126 ITR 344 (Bom)

A

question of limitation raises a plea for want of jurisdiction and is a question of law.

If

a question of limitation can be decided on the basis of facts on record, Tribunal

should permit such questions to be raised for first time before it.

Krishna Gopal Bhadra vs. ITO (1980) 124 ITR 580 (Cal)

In the event of assessee challenging the validity of search under s.132 on the ground

of non-existence of any of the circumstances/conditions enumerated in clauses (a) or

(b) or (c) of sub-section (1) of section 132 or challenging the very factum of search on the ground that there was no search warrant, the Assessing Officer as well as the Tribunal, not only have powers but are duty bound, in exercise of their quasi-judicial jurisdiction, to adjudicate upon the matter and consequently can call for the records of concerned authorities leading to the issue of authorization of search and can satisfy itself with regard to the authorization having been issued in accordance with the law.

Dr. A. K. Bansal vs. ACIT (2000) 73 ITD 49 (All) (T.M.)

30

Q.71

Whether the Tribunal has power to remand?

Ans.

Yes. The Tribunal has power to remand to the Assessing Officer or to the CIT(A). Some of the case laws are:

Where the first appellate authority has rejected a new claim of the assessee on the ground that no such claim was made in the return or in the course of assessment proceedings nor was there any material on record to support such a claim, the Tribunal is not justified in entertaining such a claim and directing the Assessing Officer to examine the claim of the assessee on merits.

CIT vs. G. S. Rice Mills (1982 )136 ITR 761 (All)

If the Tribunal feels in a particular case before it, substantial justice requires that the claim of the assessee though raised before first appellate authority for the first time should have been investigated by that authority, the Tribunal is competent to direct it to rehear the parties and give a finding on the contention.

CIT vs. Sayaji Mills (1974) 94 ITR 26 (Guj)

Under Rule 28, the power of remand is only incidental to its power to hear and dispose of the appeal. But the power of remand cannot exceed the jurisdiction under section 254(1). Hence, Tribunal cannot exercise the power of remand for purpose of enhancing the tax.

V. Ramaswamy Iyengar vs. CIT (1960) 40 ITR 377 (Mad)

The power of remand should be used sparingly and only in cases where the Tribunal after an examination of the material already placed on record by way of evidence takes the view that it is not possible for it to make a just order on the appeal without assistance of further evidence or without the assistance of a clearer finding by the authority from whose order appeal has been presented.

Pathikonda Balasubbu Setty vs. CIT (1967) 65 ITR 252 (Mys)

The power of remand is to be exercised judicially and not in an arbitrary or capricious manner. The exact nature of the remand order to be passed in a given case is a matter within the absolute discretion of the Tribunal but the power being judicial must be exercised judiciously according to rule and not humours, must be legal and regular, disciplined as opposed to capricious.

Jeypore Timber and Veneer Mills (P) Ltd. vs. CIT (1982) 137 ITR 415 (Gauhati)

The power to set aside an assessment and to direct the Assessing Officer to make a fresh assessment is clearly comprehended in the words “pass such orders as it thinks fit”. The Tribunal can therefore while setting aside the assessee’s appeal direct the Assessing Officer to make a fresh assessment after giving due notice to the assessee.

Saurashtra Salt Mfg. Co. vs. CIT (1967) 66 ITR 404 (Guj)

Q.72

Whether the Tribunal has the power of enhancement?

Ans.

No. Under section 254(1), the Tribunal is not competent to give a finding which is adverse to the assessee and make the latter’s position worse than before, thus resulting in an enhancement of assessment, [Puranmal Radhan Kishan & Co. vs. CIT (1957) 31 ITR 294 (Bom)]. New India Life Assurance Co. Ltd. vs. CIT (1957) 31 ITR 844 (Bom.) It is not open to the Tribunal to give a finding adverse to the assessee which does not arise from any question raised in the appeal nor is it open to it to raise any ground which would work adversely to the appellant and pass an order which makes his position worse than it was under the order appealed against [J.K.

31

Bankers vs. CIT (1974) 94 ITR 107 (All)]; so much so that where a set aside of the entire order of assessment and a remand order has the effect or the probability of resulting in an enhancement of the assessment under appeal, the Tribunal is not empowered to do indirectly what it cannot directly do [V. Ramaswamy Iyengar vs. CIT (1960) 40 ITR 377 (Mad); Pathikonda Balasubba Setty vs. CIT (1967) 65 ITR 252 (Mys.)]. Puranmal Radhakishan & Co. vs. CIT (1957) 31 ITR 294 (Bom), New India Life Assurance Ltd. vs. CIT (1957) 31 ITR 844 (Bom), J. K. Bankers vs. CIT – (1974) 94 ITR 107 (All), State of Kerala vs. Vijaya Stores (1979) 116 ITR 15, 18-19 (SC) & Pahulal Ved Prakash vs. CIT (1990) 186 ITR 589, 594 (All) and Jeypore Timber and Veneer Mills P. Ltd. vs. CIT (1982) 137 ITR 415 (Guwahati). But where the Tribunal finds that disallowance of a particular expenditure by the authorities below is not proper, the Tribunal is competent to sustain the disallowance, wholly or partially, under a different section under which it may be properly disallowed – Steel Containers Ltd. vs. CIT (1978) 112 ITR 995 (Cal).

Q.73

Whether the Tribunal has the power to call for documents?

Ans.

Under section 255(6), read with section 131, the Tribunal has the power to call for the documents relevant for deciding the appeal. In Union of India vs. Sheo Shankar Sitaram (1974) 95 ITR 523 (All) at the request of the assessee, the Tribunal directed the Department to produce certain records, which pertained to the assessment and penalty proceedings and the Department’s claim of privilege under section 124 of the Evidence Act, was negatived by the court.

Q.74

Whether the Tribunal has power to pronounce upon validity of Act?

Ans.

No. In CIT vs. Straw Products Ltd. (1966) 60 ITR 156 (163-4) the Supreme Court held that the Tribunal and the tax authorities being preservers of this Act, cannot pronounce upon the constitutional validity or vires of any provision of this Act. Therefore, such a question cannot arise out of the order of Tribunal and cannot be

made subject matter of reference to the High Court. Such a question of validity can be raised only in writ petition. Refer Venkatraman & Co. Ltd. vs. State of Madras (1966) 60 ITR 112 (SC), Dhrangadhra Chemical Works Ltd. vs. CIT (1975) 101 ITR

491

(Bom),

L. Chandrakumar vs. Union of India (1997) 228 ITR 725 (SC).

Q.75

Whether the Tribunal has power to award cost?

Ans.

Yes. With effect from 1-6-1999, sub-section 2B is inserted in Section 254, which gives the Tribunal discretion to award cost in suitable cases if the facts so warrant. In ACIT vs. Shanti Star Builders ITA No. 9601/B/91 dated 30-6-1999, Bench ‘B’, Mumbai, the Tribunal awarded cost of Rs. 2,000/- for the inconvenience caused to the assessee. In that case, the departmental counsel had sought for an adjournment though on earlier occasion it was agreed that on the next date, the case would be argued. The assessee’s counsel had come from Calcutta on both the occasions. However, the Tribunal is very slow in awarding the cost. In Ms. Jay Brothers Investment & Trading vs. Dy. CIT, ITA No. 6542/M/97 dated 6-11-2000, the Tribunal awarded the cost, while dismissing Department appeal holding that issue involved in the appeal is self evident and appeal is frivolous. In one case, though notice for hearing was given of only seven days and adjournment was moved in advance, on the ground of counsel was away to Ranchi as per pre-programme, the Tribunal adjourned on cost of Rs. 300/-. The Federation has made a representation to lay down guidelines to have uniformity in approach. The speeches of Shri R. P. Garg, Vice President and Shri M. K. Chaturvedi, Vice President, at All India Members Conference 2003 (87 ITD Special issue pages 20-29 and 40-42) can be referred for guidance.

32

Q.76

Can Tribunal dismiss an appeal ex parte?

Ans.

Rules 24 and 25 of Appellate Tribunal Rules, 1963, lay down the procedure for hearing of appeal ex parte by the Tribunal. Proviso to rule 24 provides that when an appeal has been disposed of ex parte and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called out for hearing, the Tribunal shall make an order setting aside the ex parte order and restoring the appeal. If a notice is sent to the assessee by Registered Post, the postal authorities may send back the notice stating “refused to accept” or the postal authorities may deliver the notice to a person who is not authorised to receive. If on receiving the acknowledgment from postal authorities an ex parte order is passed, and if an assessee files an affidavit and brings to the notice to the Tribunal that he has not received or he has not been served the notice, the Tribunal should restore the matter. In Meghji Kanji Patel vs. Kundanmal Chamanlal AIR 1968 Bom 387, the Hon’ble Bombay High Court held that where an affidavit is filed the same has to be accepted. This view of Bombay High Court, is affirmed by the Supreme Court in Puwada Venkateswara Rao vs. Chindamana Venkata Ramana AIR 1976 SC 869, 871. In CIT vs. Multiplan India (P) Ltd. (1991) 38 ITD 320, (Del.) the reference was filed by the department. On the date of hearing neither the representative of the department was present nor an adjournment application was moved. The Tribunal passed the order after 5 days, dismissing the appeal of department, treating the appeal as unadmitted. Against the order, the department filed reference Application to refer the matter to High Court. The Tribunal rejected the Reference Application on the ground that the Department should have made application for restoration of appeal under rule 24 of the Income Tax Appellate Tribunal Rules and observed that revenue chose to add to the litigation for no justifiable reason, hence no question of law arose. However, it may be noted that the Tribunal has not considered the ratio laid down by Supreme Court in CIT vs. Chenniappa Mudaliar (1969) 74 ITR 41 (SC), wherein the Court held that the Tribunal must decide the case on merit and cannot dismiss it on non-appearance of appellant. Hence, in our view the order of the Tribunal in Multiplan India requires reconsideration. It has been observed that in a number of cases, matters have been dismissed by the Tribunal applying the ratio of Multiplan India and thereafter, when the assessee makes an application for restoration under rule 24 of the Income-tax Appellate Tribunal Rules, the same is restored. This results in multiplicity of litigation. Matters come up for hearing before the Tribunal after about 6 years of filing. It may be possible that the appellant might have changed its address, consultant etc. In such a case, before passing the ex parte order, if a notice is sent through assessing officer lot of unintended paper work, time and expenses can be saved. When an assessee pays the Tribunal fees, it cannot be said that he has no interest in pursuing the matter. It is therefore urged that before applying the ratio of Multiplan India (P) Ltd, a notice may be sent to the assessee through assessing officer.

Applications made for restoration of appeals which are dismissed in limine under rule 24 on account of non-appearance, deserve to be liberally construed. The approach of the Tribunal should be little liberal with a view to advance justice. Rule 24 of the Income-tax (Appellate Tribunal)Rules, 1963, is similar to Order 9, rule 13 of the Code of Civil Procedure, 1908. The words “was prevented by any sufficient cause from appearing” must be liberally construed to enable the court or the Tribunal to exercise powers ex debito justitiae. The “sufficient cause” referred to in rule 24 may be construed as good cause. If the cause is good it would also be sufficient. If a party is unaware of the date of hearing and the unawareness is not due to any fault of his, then unawareness would be sufficient cause which would prevent a party from

33

appearing in the Court. Rainbow Agri Industries Ltd. vs. ITAT (2004) 266 ITR 39 (Bombay); CIT vs. Ansal Housing & Constructions Ltd. (2004) – 190 CTR 172 (Delhi).

Where an ex parte order is passed against the assessee, great responsibility is cast on the Members of Tribunal. The Members have to act not only as judges but also as representative for the party who is not represented. The duty of the Tribunal is to decide correct interpretation of law, hence, it may not be desirable to decide any issue which involved an important question of law in an ex-parte order. However, if it is inevitable, then the Tribunal may request any member of Bar to assist the Bench as amicus curiae. In such a situation assistance of the Bar Association may be sought. If such a system is developed, it may go a long way in building the confidence of the institution in the mind of the public. Even an ex parte order, should not lead to punishment to an assessee who may not be in a position to engage a competent representative.

Q.77

Whether an ex parte order can be recalled? If yes – its procedure.

Ans.

Yes. This is a power incidental to and ancillary to the jurisdiction given for the Tribunal. Murlidhar Sudra vs. ITAT (1973) 92 ITR 189 (Cal)

In following cases it has been held that the ex parte order can be recalled: CIT vs. ITAT and Another (1992) 196 ITR 640 (Ori.) at (645), CIT vs. ITAT & Another (1992) 196 ITR 683 (Ori), Joseph Michael & Bros. vs. ITAT (1993) 199 ITR 466 (Ker.), Kripa Shankar vs. CIT/WT (1990) 181 ITR 183 (All), Ravi Construction & Co. vs. CIT (1988) 173 ITR 674 (Guj.), CWT vs. Illa Dalmia (Smt.) (1987) 168 ITR 306 (Del.), Mahaverprasad Jain vs. CIT (1987) 172 ITR 331 (M. P.).

The assessee can make an application to recall the ex parte order passed by the Tribunal. The Tribunal has power under Rule 24 of the Rules to restore the appeal decided ex parte. The application for restoration should be in detail, explaining cause of absence, supported by material and affidavit, if possible. Rule 24 should be construed liberally (Rainbow Agri Industries Ltd. vs. ITAT (2004) 266 ITR 38 (Bombay). As per Rule 25 of the Tribunal Rules, the respondent can also make an application to restore the ex parte order passed against him. However, the proviso to Rule 25 is not clear. Hence, amendment of the provision is desirable to avoid litigation.

Q.78

What is meant by “discretionary power”?

Ans. The word ‘discretion’ standing single and unsupported by circumstances signifies exercise of judgement, skill or wisdom as distinguished from folly, unthinking or haste; evidently therefore a discretion cannot be arbitrary but must be a result of

judicial

thinking.

The

word in

itself

implies

vigilant circumspection

and

care;

therefore,

responsibility.

On many aspects and matters the members of the Tribunal have discretion. Discretion should be exercised judiciously as a judicial authority well versed in law. In Halsbury’s Laws of England, 4th Edn., Vol. I, it has been observed : “A statutory discretion is not, however, necessarily or, indeed, usually absolute; it may be qualified by express and implied legal duties to comply with substantive and procedural requirements before a decision is taken whether to act and how to act. Moreover, there may be a discretion whether to exercise a power, but no discretion as to the mode of its exercise; or a duty to act when certain conditions are present, but a discretion how to act. Discretion may thus be coupled with duties”.

also imposes a heavy

here

the

Legislature

concedes

discretion

it

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Discretion, in general, is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution; nice discernment, and judgement directed by circumspection; deliberate judgement; soundness of judgment; a science or understanding to discern between falsity and truth between wrong and right, between shadow and substance, between equity and colourable glosses and pretences, and not to do according to the will and private affections of persons. When it is said that something is to be done within the discretion of the authorities, that something is to be done according to the rules of reason and justice, not according to private opinion; according to law and not humour. It is to be not arbitrary, vague, and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man, competent to the discharge of his office ought to confine himself (Per Lord Halsbury, L. C., In Sharp vs. Wakefield, (1981) Appeal Cases 173). Also (See S. G. Jaisinghani vs. Union of India and Other (AIR 1967 SC 1427). Discretion has to be exercised fairly and without fear. When one hold flowers in both hands, it gives equal fragrance without discriminating either of the hands – whether it is right or left – nothing more or nothing less fragrance to each of the two. It is rightly said “Men with discretion will not deflect from the path of rectitude”.

Q.79

Whether the Tribunal can give finding/direction for another year?

 

Ans.

Generally, the Tribunal does not have the jurisdiction to give any direction with regard to the proceedings relating to another year or to include deleted amount in any other year‘s assessment. Where an appeal relates to a particular assessment year, the finding and direction must necessarily be limited to that particular year –ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC). The Tribunal cannot order reopening of assessment for another year – CIT vs. Manick Sons (1969) 74 ITR 1, 5(SC). In case any deduction is disallowed after holding it is allowable in another year, a finding / direction should be given in the interest of justice. (Perfect Equipments vs. Dy. CIT (2003) 85 ITD 50 (Ahd.)

Q.80

Can Tribunal setaside matter to cure the deficiency in the assessment order?

Ans.

Fresh opportunity need not be granted to the erring tax authority to make good the deficiency. In Asst. CIT vs. Anima Investment Ltd. (2000) 73 ITD 125 (Del.) (TM), the Delhi Tribunal held that the Tribunal cannot set aside the matter to make good a

deficiency

in

the

assessment

order.

However,

the Tribunal is liberal and may restore the matter to the A.O. for fresh enquiry.

Q.81

Can Tribunal pass protective order?

 

Ans.

In Smt. Hemlata Agarwal vs. CIT (1967) 64 ITR 428 (All.), the Court held that, though it might be open to an ITO to make protective assessment; it is not open to the Tribunal which is final Court of fact, to make a protective order.

Q.82

Can the Tribunal give more relief than that asked for by the appellant?

Ans. The Act has left the parties going up as appellants before the Tribunal to choose and set the scope of their appeals by raising questions arising out of the relevant proceedings. They can limit their attack on the determination of the first appellate authority and seek an intervention of the Tribunal only to the extent they consider necessary for getting the relief they intend to claim from the Tribunal. They are not, however, permitted to widen the scope of the proceedings determined by the Assessing Officer or the first appellate authority. Within the outer limit of those proceedings, they are free to ask for the necessary relief thus limiting the subject matter and ultimately the scope of the appeal. It is plain that once these limits are set, the Tribunal can deal only with that part of the order of the lower authority

35

which has been made the subject matter of the appeal before the Tribunal. It would not be permissible for the Tribunal to adjudicate or give a finding on a question which was not agitated or in regard to which no relief was claimed before the lower authorities or which was not in dispute and which does not form the subject matter of the appeal. It is thus clear that the Tribunal has no jurisdiction to base its decision on a question which was not the subject of dispute at any stage of the proceedings and is not the subject matter of the appeal. It has no power to enlarge the scope of the proceedings or that of the appeal before it by permitting the parties or any one of them to ask for a relief which was never the subject matter in those proceedings or of the appeal. In short, the Tribunal is not competent to travel beyond the scope of the appeal in order to decide questions raised by the assessee subsequently. [CIT vs. Krishna Mining Co., (1977) 107 ITR 702, 707-08, 708 (A.P.)]

Q.83

Ans. Yes. The principle that subsequent events can be taken into consideration by a Court when granting relief to parties is applicable to assessments. Therefore, the Tribunal hearing an appeal has jurisdiction to admit additional evidence regarding a subsequent event [Anglo American Direct Tea Trading Co. vs. CAGIT, (1968) 69 ITR 667 (SC)].

Q.84 What is expected of the Tribunal Ans. The Tribunal is the final fact finding authority and if it goes wrong the party is virtually left with no remedy. A reference to the High Court presupposes a pure point of law or a point of law of substantial importance but if on an appreciation of evidence much is to be decided then there arises a dead lock. In all judicial proceedings it is a well settled principle of law that the quality of the order that is passed must demonstrate a total application of mind by the authority who has passed the order. Where a sufficiently high authority such as the Tribunal is concerned a high sense of responsibility must pervade the order at all times. There has to be proper consideration of the facts and an appreciation in the manner prescribed by law which is not to be careless and more importantly, the application of all the well defined principles that govern the case [ACIT vs. Gautam Investments (P) Ltd. (2001) 250 ITR 324 (Kar).]

Tribunal to consider case carefully and to give a well reasoned order. Order must indicate that mind has been applied to factual aspects of the case. Recording of reasoning or findings is basic in a judicial order. The Tribunal as the ultimate fact finding authority, has a very high degree of responsibility cast on it because correction of errors thereafter in many cases is not possible. When there is a legal duty enjoined on a forum that duty is liable to be discharged and cannot be bypassed. Since an issue of fact is also intertwined with a legal aspect it is incumbent on the Tribunal to consider the case on the merits and pass a well reasoned order. Even in cases where the appellate authority reaches a finding that interference is not necessary, the order need not be long but the quality of the order must indicate that the authority has applied its mind to all aspects of the case factually and legally and that there is justification for its decision irrespective of whether it concurs or differs. [J. Bheemananda Gupta vs. Asstt. CIT (2001) 250 ITR 537 (Kar.), Lalchand Bhagat Ambika Ram vs. CIT (1959) 37 ITR 288 (S.C.)].

The Tribunal being the final fact finding authority is expected to apply its mind to the contentions and issues and give a separate finding on each issue. The fact that the order of the Tribunal from independently examining the issues and then discussing the same. [Vinjane Centre vs. Dy. CIT (2002) 258 ITR 191 (Madras)].

Can Tribunal consider subsequent events?

36

The Tribunal while passing orders cannot gloss over important matters in a one sentence statement that these judgments are distinguishable. Even assuming that the judgments are either not applicable or distinguishable, it is a well defined procedure that applies to all judicial forums that it is essential to record what the judgments in question are, or a brief summary of the contentions raised and to record the findings thereon. It is not permissible to merely brush aside important legal issues or to disregard them as it will become impossible for the next higher authority to be able to decipher as to what is the ground on which the Tribunal rejected a particular contention [Munibyrappa vs. CIT (2004) 265 ITR 560(Kar.)].

When the Tribunal was to dislodge the order passed by the appellate authority it was obligatory on the part of the Tribunal to demonstrate as to how the findings recorded by the appellate authority were not consistent with the facts and the provisions of law. It was obligatory on the part of every appellate authority to point out by good and acceptable reasoning as to how the facts and circumstances of one case happened to be different from other cases. It was improper to close the doors to a litigant by a casual treatment of some statements moving towards a conclusion that the precedents on which such litigant relied were different from his case. [R.D. Joshi & Co. vs. CIT (2001) 251 ITR 332 (M.P.)].

The Appellate Tribunal is a judicial body exercising judicial powers under the statute. It is not empowered to employ its jurisdiction arbitrarily. Whatever it does must be done in consonance with sound judicial principles and in accordance with well accepted doctrines applicable to judicial bodies. The power conferred on the Tribunal by section 254 to pass “such orders thereon as it thinks fit” in respect of an appeal before it must be exercised within the limits which can be discovered by reference to the jurisdiction of the authority whose order has given rise to the appeal [CIT vs. Ram Murti (1973) 87 ITR 577 (Allahabad)]. If a provision is in the statute book when the question come up for decision before the Tribunal, even though the assessee may not specifically refer to such provision, the Tribunal ought to have considered and referred to such provision. It is the duty of the Tribunal to consider the law as it existed then even though the assessee failed to bring it to its notice. [Kerala Chemicals & Protein Ltd. vs. CIT (1999) 235 ITR 467 (Kerala); CIT vs. Mahalakshmi Sugar Mills Co. Ltd. (1986) 160 ITR 920 (S.C.)].

Whether informal question can be put to the assessee or his counsel at the time of hearing?

Ans. The Tribunal being a quasi-judicial authority is expected to restrain itself to the assessment order, appellate order and other papers or documents placed in the paper book and arguments of both the parties. The Tribunal is not expected to put informal questions to the party or their counsel. Such answers cannot be relied upon for coming to any conclusion adverse to the assessee in view of the procedure prescribed by Rules 29, 30 and 31. Such answers could not form part of the record and no adverse inference could be drawn against the assessee based on such informal answers. [Roshan Di Hatti vs. CIT (1977) 107 ITR 938 (S.C.)].

Q.86

Q.85

When there is an appeal and a cross appeal – can the two appeals be heard separately?

Ans. No. It is desirable that the Tribunal hear both appeals together. On account of the mistake of the Tribunal is not clubbing the two appeals, the statutory right of appeal of one party could not be negatived. It is a well settled proposition of law that no party should suffer on account of the mistake of the Court or the Tribunal [CST vs. Vijai Int. Udyog (1985) 152 ITR 111 (S.C.)].

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CHAPTER

7

MISCELLANEOUS APPLICATION – RECTIFICATION OF MISTAKE

Q.87

Ans. The Tribunal’s power to rectify its order is derived from the provisions contained in section 254(2) of the Act. The said section provides that the Tribunal shall rectify any mistake apparent from the record by amending any order passed by it under sub- section (1) within four years from the date of the order if the mistake is brought to its notice by the assessee or the Assessing Officer. The proviso to section 254(2) makes it clear that any amendment which has the effect of enhancing an assessment or reducing a refund or increasing the liability of an assessee cannot be made unless the Tribunal has heard the assessee on its intention to do so.

Rule 34A of the Appellate Tribunal Rules 1963 which was inserted w.e.f. 25th July, 1991 provides for the procedure for dealing with an application under section 254(2). It provides that an application shall clearly and concisely set out the mistake apparent from the record of which rectification is sought. The application must be in triplicate and the procedure for filing of appeals is to apply mutatis mutandis to such applications. The Bench which originally heard the matter must ordinarily hear the application, unless the President, Senior Vice President, Vice President or the Senior Member present at the station otherwise directs. The application must be disposed of after hearing both the parties. The proviso to sub-rule (3) of Rule 34A provides that it would not be necessary to post a Miscellaneous Application for hearing if it prima facie appears to be a petition for review. Sub-rule (4) provides that an order disposing of an application under sub-rule (3) shall be in writing with reasons in support of its decision.

Prior to the insertion of Rule 34A in the Rules, there was controversy as to whether the principles of natural justice were required to be followed before an order is made disposing of application under section 254(2). The Delhi High Court in Smart Pvt. Ltd. vs. ITAT (1990) 182 ITR 384 took the view that although there was no specific provision for dealing with an application under section 254(2), the rules of natural justice would require that both parties be heard before disposal of the application.

A possible area of controversy is where the proviso to sub-rule (3) of Rule 34A is

invoked and Miscellaneous Application is not posted for hearing on the ground that

it appeared prima facie to be a petition for review. [Refer ITO vs. Hemesh Family

Trust (1995) 51 TTJ 601 (Ahd)] or that the rejection of the Miscellaneous Application does not result either in increase or a reduction of refund when no hearing is required [Refer Drill Rock Engg. (P) Ltd. vs. ITO (1990) 36 ITD 135 (Hyd) & Pearl Agencies vs. IAC (1989) 30 ITD 342 (Del)]. Rejecting the application under rule 34A(3) without hearing shall be in violation of principles of natural justice and such rule is void. The Tribunal should hear the assessee before dismissing the petition. An application cannot however be dismissed solely on the ground that the assessee failed

to appear on the date of hearing – Brijlal vs. ACIT (1996) 59 ITD 1 (Del) (TM).

Whether the Tribunal has power to rectify its order?

38

Q.88

There is no doubt that the power of review is not an inherent power but must be conferred by law either specifically or by necessary implication. (Patel Thackersy vs. Profyumansinghji Arjunsinghji AIR 1970 SC 1273) Courts have consistently held that review proceedings imply those proceedings where a party as of right can apply for consideration of the matter already decided upon after a fresh hearing on the merits of the controversy between the parties and that such a remedy is available only if provided by the statute. As early as in Trikamlal Maneklal In Re : (1958) 33 ITR 725 (Bom) the Bombay High Court held that the Tribunal having once delivered a judgment which has by operation of law become final is not entitled to review its decision in a subsequent proceeding.

The general rule, however, is subject to exceptions, and one of the exceptions is that a Judicial Tribunal can always recall and quash its own order when it is shown that it was obtained by fraud or by palpable mistake or was made in utter ignorance of the statutory provision. (Mangat Ram Kuthiala vs. CIT (1960) 38 ITR 1 (Pun). However, an inherent power to rectify a wrong committed by itself cannot be construed to be a power of review. (Shew Paper Exchange vs. ITO (1974) 93 ITR 186 (Cal.). Thus a Court or Tribunal can be said to have an inherent power and jurisdiction to rectify a wrong or correct an error committed by itself. (S.B. Singar Singh & Sons vs. ITAT (1965) 58 ITR 626 (All.)

It is a moot point as to when the Tribunal can be said to be exercising its inherent power or its statutory power to correct a mistake apparent from the record under section 254(2) and when the exercise of the power tantamounts to a review of its earlier order. There is marked difference between review and the rectification. Distinction is not properly appreciated.

Under what circumstances, can the order of Tribunal be said not to contain a mistake apparent on record?

Ans. Failure to consider argument advanced is not an error apparent on the record. CIT vs. Ramesh Electric and Trading Co. (1993) 203 ITR 497 (Bom), Khushalchand B. Daga vs. ITO (1972) 85 ITR 48 (Bom) Oversight of fact is not a mistake apparent. CIT vs. Gokulchand Agarwal (1993) 202 ITR 14 (Cal) Erroneous order in the light of subsequent decision of jurisdictional High Court is not rectifiable. Kishanchand J. Bhavnani (HUF) vs. WTO (1989) 29 ITD 383. (Bom.). Recalling of an order under section 254(2) not possible CIT vs. ITAT (1992) 196 ITR 683 (Orissa). The Orissa High Court held that the power under section 254(2) is merely to “amend an order passed” under section 254(1). “Amendment” of order does not obliterate the order originally passed and its substitution by another order. Order rejecting Miscellaneous Application cannot be rectified. In CIT vs. ITAT (1992) 196 ITR 838 (Orissa).

Q.89

Under what circumstances Courts have held that the order of Tribunal is liable to be rectified?

Ans. Order contrary to pronouncement. Refer CIT vs. G. Sagar Suri and Sons (1990) 185 ITR 484. (Del). CIT vs. Sunil Kumar (1995) 212 ITR 238 (Raj.) Order made under misconception or misapprehension. Refer Maharaja Martant Singh Ju Deo vs. CIT (1988) 171 ITR 586 (MP). Failure to consider preliminary objection. Refer Laxmi Electronic Corporation Ltd. vs. CIT (1991) 188 ITR 398 (All), CIT vs. Keshav Fruit Mart (1993) 199 ITR 771 (All).

Failure to consider alternative argument CIT vs. ITAT (1988) 172 ITR 158 (MP), Failure to consider material on record CIT vs. Mithalal Ashok Kumar (1986) 158 ITR 755 (MP),Order based on erroneous assumptions CIT vs. Shakuntala Rajeshwar

39

(1986) 160 ITR 840 (Del), Order based on a decision subsequently reversed, Kil Kotagiri Tea and Coffee Estates Company Ltd. vs. ITAT (1988) 174 ITR 579 (Ker)

Non-consideration of relevant provisions of law/rule/Supreme Court decision. CIT

vs. Quilon Marine Produce Co. (1986) 157 ITR 448) (Ker); Modu Timblo vs. 1st WTO

(1995) 53 ITD 53 (Pune)(TM); IAC vs. Gilard Electronics (1986) 18 ITD 176 (Jp.); ACIT vs. Somany Pilkington Ltd. (1994) 49 ITD 207 (Delhi). Similarly, CIT vs. Ballabh Prasad Agarwalla (1997) 90 Taxman 283 (Cal). CIT vs. Subodhchandra S. Patel (2004) 265 ITR 445 (Gujarat). Decisions not cited referred to in order Lakhmini Mewal Das vs. ITO (1972) 84 ITR 649 Cal). Decisions cited not referred to in order Finquick Finance (P) Ltd. vs. ACIT (2003) 87 ITD 323 (Delhi) (TM), Mohan Meakin Ltd. vs. ITO (2004) 84 TTJ (TM) 1.

Order can be amended in the light of retrospective amendment.

M. K. Venkatachalam vs. Bombay Dyeing and Mfg. Co. Ltd. (1958) 34 ITR 143 (SC).

On amendment with retrospective effect would require a rectification consequent to the retrospective amendment. CIT vs. Eva Raha (1980) 121 ITR 293 (Gau); CIT vs.

Kelvin Jute Co. Ltd. (1980) 126 ITR 679 (Cal). Even if a reference has been made ITO

vs. Homi Mehta & Sons (P) Ltd. (1985) 14 ITD 64 (Bom).

Order can be amended in the light of a subsequent Supreme Court decision. It is well settled that where no further investigation of facts is called on the facts found, the principle of law declared by the Supreme Court can be straightaway applied with the consequence of rendering order mistaken. It would be case of a mistake apparent from the record [Walchand Nagar Industries Ltd. vs. V. S. Gaitonde (1962) 44 ITR 260 (Mah); CBDT Circular No. 68 dated 17-11-1971 – Chaturvedi & Pithisaria – Circular Book Vol. II page 1847; ITO vs. Shashi Raj Kapoor (1987) 21 ITD 406 (Bom) Bank of Rajasthan vs. IAC (2004) 88 ITD 577 (Jodh) HPFC vs. CIT (1998) 233 ITR 450 (H.P.); His Highness Sir Rama Varma vs. ITO (1982) 2 ITD 491 (Coch) Bank of Rajasthan Ltd. vs. IAC (2004) 88 ITD 577 (JP) but not where limitation had expired Soorajmull Nagarmull vs. CIT (1984) 20 TTJ 145 (Cal). Supreme Court order passed after Rectification Order passed. Rectification is without jurisdiction. CIT vs. Schlumberger Sea Co. Inc. (2003) 264 ITR 331 (Calcutta).

Tribunal finding that there was an error in its order and recalling it is finding of fact, no question of law arises from its order.

CIT vs. Umeshchand K. Patel (1997) 225 ITR 1050 (M.P.)

Tribunals can rectify errors in its order.

Seth Madan Lal Modi vs. CIT (2003) 261 ITR 49 (Delhi)

If there is mistake committed by Courts or Tribunal it needs to be rectified as no one

should suffer or come to grief on account of mistake committed by Courts.

Rahulkumar Bajaj vs. ITO (1999) 69 ITD 1 (SB) (Nag.)

Where decisions cited before the Tribunal are not considered at all then it may be a case of a mistake apparent from record but when the decisions relied upon have been considered but not to the advantage of a party, is not a mistake apparent from record.

Finquick Finance (P) Ltd. Vs. CIT (2003) 87 ITD 323 (TM) (Del)

A look at the record must show that there has been an error, reference to documents

outside the record and the law is inpermissible.

CIT vs. Keshri Metal Pvt. Ltd. 237 ITR 165 (SC)

40

Only an apparent error of fact or law can be rectified. If the mistake of law has to be established by constructing the words of a section to find its proper meaning, then such an error cannot normally be a rectifiable error.

Poothundu Plantations Pvt. Ltd. vs. Agricultural Income Tax Office and Other (1996) 221 ITR 557 (SC)

The Hon’ble Supreme Court in L. Hirday Narain vs. ITO (1970) 78 ITR 26 at 27 observed: “If a statute invests a public officer